Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):

(4

)

Proposed maximum aggregate value of transaction:

(5

)

Total fee paid:

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the
date of its filing.

We cordially invite you to attend our Annual Meeting of
Shareholders. We will hold the meeting on Friday, April 27,
2007 at 10:00 a.m. Eastern time at the Merrill Lynch
Hopewell Campus, 1550 Merrill Lynch Drive, Hopewell, New Jersey.

At the meeting, you will vote on a number of important matters
described in the attached Proxy Statement.

Your vote is very important regardless of the number of shares
you own. Even if you plan to attend the meeting in person,
please vote your proxy by telephone, by the internet or by
completing and returning your proxy card by mail so that we can
be assured of having a quorum present to hold the meeting.
Instructions on how to vote are included with your proxy card or
have been forwarded to you by your bank, broker or other holder
of record.

We look forward to your participation in the Annual Meeting,
either through your proxy vote or your attendance at the
meeting. If you need directions to the meeting location, or have
a disability that may require special assistance, please contact
our Corporate Secretary, Judith A. Witterschein, by mail at
Merrill Lynch & Co., Inc., 222 Broadway, 17th Floor,
New York, New York
10038-2510,
by telephone at
(212) 670-0432
or by e-mail
at corporate_secretary@ml.com.

The 2007 Annual Meeting of Shareholders (Annual Meeting) of
Merrill Lynch & Co., Inc. (Merrill Lynch or the
Company) will be held on Friday, April 27, 2007 at
10:00 a.m. Eastern time at the Merrill Lynch Hopewell
Campus, 1550 Merrill Lynch Drive, Hopewell, New Jersey.

At the Annual Meeting, you will be asked to:



elect three directors to the Board of Directors, each for a
three-year term;



ratify the appointment of Deloitte & Touche LLP as the
Companys independent registered public accounting firm for
the 2007 fiscal year;



vote on proposals submitted by shareholders; and



consider any other business properly brought at the Annual
Meeting.

The accompanying Proxy Statement describes the matters being
voted on and contains other information relating to Merrill
Lynch.

Shareholders as of 5:00 p.m. Eastern time on
February 28, 2007 are entitled to vote at the Annual
Meeting and any adjournment or postponement of the meeting.

By Order of the Board of Directors

JUDITH A. WITTERSCHEINCorporate Secretary

New York, New York

March 16, 2007

In addition to the notice provided as part of the proxy
materials for this Annual Meeting, we included public notice of
the date of the Annual Meeting in our Quarterly Report on
Form 10-Q
for the quarter ended September 29, 2006, which we filed
with the Securities and Exchange Commission on November 3,
2006. We also have posted notice of the Annual Meeting on our
Investor Relations website at www.ir.ml.com.

Why am I
receiving this Proxy Statement and who is soliciting my
vote?

We have provided this Proxy Statement in connection with the
solicitation of proxies by our Board of Directors for our Annual
Meeting. As a shareholder, you may attend the Annual Meeting and
are entitled and requested to vote on the proposals described in
this Proxy Statement. We released our proxy materials, including
the 2006 Annual Report and this Proxy Statement, to shareholders
on March 16, 2007.

What am I being
asked to vote on?

You are being asked to vote on:



the election of three Directors to the Board of Directors, each
for a three-year term;



a proposal to ratify the appointment of Deloitte &
Touche LLP as our independent registered public accounting firm
for the 2007 fiscal year; and



proposals submitted by shareholders.

How does the
Board of Directors recommend I vote?

The Board recommends you vote:



for the election of three Directors to the Board
of Directors, each for a three-year term;



for the proposal to ratify the appointment of
Deloitte & Touche LLP as our independent registered
public accounting firm for the 2007 fiscal year; and



against all proposals submitted by shareholders.

What is the
record date for the Annual Meeting?

February 28, 2007 at 5:00 p.m. Eastern time was the
record date for determining shareholders who are entitled to
vote at the Annual Meeting and at any adjournment or
postponement of the meeting.

How do I
vote?

Holders of record - If you are a holder of record (that
is, if your shares are registered in your own name with

our
transfer agent), you may vote using the enclosed proxy card. You
must sign and date the proxy card and return it in the enclosed
postage-paid envelope. As a holder of record, you also may vote
by telephone, the internet or in person at the Annual Meeting.
Instructions on how to vote by telephone or the internet are
included with your proxy card.

Street name holders - If you hold your shares in
street name (that is, if you hold your shares
through a bank, broker or other holder of record), please refer
to the information on the voting instruction form included with
these materials and forwarded to you by your bank, broker or
other holder of record to see your voting options. This voting
instruction form provides instructions on voting by mail,
telephone or the internet.

If you want to vote in person at the Annual Meeting and you hold
your shares in street name, you must obtain a proxy from your
bank, broker or other holder of record authorizing you to vote
and bring the proxy to the meeting, as well as an account
statement or other evidence of ownership.

How many votes do
I have?

You have one vote for each share of our common stock and for
each share of exchangeable securities (issued by one of our
Canadian subsidiaries and exchangeable into one share of our
common stock) that you owned on the record date.

How many votes
can be cast by all shareholders?

A total of 882,814,116 votes may be cast, consisting of:



one vote for each of the 880,190,428 shares of our common
stock, par value $1.33 1/3 per share, outstanding on the record
date; and



one vote for each of the 2,623,688 shares of exchangeable
securities outstanding on the record date.

Can I view a list
of shareholders entitled to vote at the Annual
Meeting?

Yes. A list of shareholders as of the record date will be
available for inspection and review for any purpose germane to
the Annual Meeting from April 17, 2007 through
April 27, 2007 at our headquarters and principal executive
offices located at 4 World Financial Center, New York, New York.
We also will make the list available at the Annual Meeting.

How many votes
must be present to hold the Annual Meeting?

A majority of the votes that may be cast, or 441,407,059 votes,
is needed to hold the Annual Meeting. If you have returned your
proxy instructions or attend the Annual Meeting in person, your
stock will be counted for the purpose of determining whether
there are enough votes present, even if you abstain from voting
on some or all matters introduced at the Annual Meeting.

How many votes
will be required to elect the Directors or to adopt or ratify
each of the proposals?

A plurality of the votes cast at the Annual Meeting is required
to elect Directors to the Board of Directors. However, in an
uncontested election, our Corporate Governance Guidelines
provide that any nominee for Director who receives more
withhold votes than for votes shall tender his or
her resignation to the Board of Directors following
certification of the shareholder vote. For further information,
see Corporate Governance - Significant Board
Practices - Voting for Directors in this Proxy Statement.

An affirmative vote by a majority of the shares represented at
the meeting and entitled to vote is required to ratify the
appointment of Deloitte & Touche LLP as our independent
registered public accounting firm and to adopt each of the
shareholder proposals.

Can I change or
revoke my vote?

Yes.

Holders of record - If you are a holder of record,
to change your vote, you must:

Street name holders - If you hold your shares in
street name, and wish to change or revoke your vote, please
refer to the information on the voting instruction form included
with these materials and forwarded to you by your bank, broker
or other holder of record to see your voting options.

What if I do not
indicate my vote for one or more of the matters on my proxy
card?

Holders of record - If you are a holder of record and
return a signed proxy card without indicating your vote on a
matter submitted at the meeting, your shares will be voted on
that particular matter as follows:



for the election of the three persons named under
the caption Nominees for Election to the Board of
Directors;



for ratification of the appointment of
Deloitte & Touche LLP as our independent registered
public accounting firm; and



against each of the shareholder proposals.

Street name holders - If you hold your shares in
street name, please refer to the information on the voting
instruction form included with these materials and forwarded to
you by your bank, broker or other holder of record for an
explanation of the effect of not indicating a vote.

In the election of Directors, you can vote for the
three Directors standing for election, or you can indicate that
you are withholding your vote for any or all of the
nominees. Withhold votes will have no effect on the
outcome of the proposal to elect Directors. However, our
Corporate Governance Guidelines provide that in an
uncontested election, any nominee for Director who receives more
withhold votes than for votes shall tender
his or her resignation to the Board of Directors following
certification of the shareholder vote. For further information,
see Corporate Governance - Significant Board
Practices - Voting for Directors in this Proxy
Statement.

In connection with the proposal to ratify the appointment of
Deloitte & Touche LLP as our independent registered
public accounting firm or any of the shareholder proposals, you
may vote for or against a proposal, or you may
abstain from voting on a proposal. An abstention will
have the same effect as a vote against the proposal. An
affirmative vote of a majority of the shares represented at the
meeting and entitled to vote is required in order for the
proposal to pass.

What happens if I
do not vote my proxy?

Holders of record - If you are a holder of record
and you do not vote shares held in your name, those shares will
not be voted.

Street name holders - If you hold your shares
through our broker-dealer subsidiary, and do not return your
voting instructions, those shares will be voted in the election
of Directors and on the proposal to ratify the appointment of
our independent registered public accounting firm in proportion
to the votes cast by all other shareholders.

If you hold your shares through any other broker, and do not
return your voting instructions, your shares can be voted in the
election of Directors and on the independent registered public
accounting firm ratification proposal at your brokers
discretion.

No broker may vote your shares on the shareholder proposals
without your specific instructions.

If your broker votes your shares on some, but not all, of the
proposals, the votes will be broker non-votes for
any proposal on which they are not voted. Broker non-votes count
for quorum purposes but are not treated as votes cast and,
therefore, will have no effect on the outcome of the relevant
vote.

Will my vote be
confidential?

Yes. Your vote will not be disclosed to our Directors or
employees, except for a very limited number of employees
involved in coordinating the vote tabulation process. An
independent inspector reviews the vote tabulation process and
certifies the vote results.

Our confidentiality policy does not apply to certain matters,
such as contested elections or disputed votes.

How can I attend
the Annual Meeting?

Only shareholders as of the record date, February 28, 2007
at 5:00 p.m. Eastern time, may attend and vote at the
Annual Meeting.

If you plan to attend the Annual Meeting, we ask that you notify
our Corporate Secretary using the contact information set forth
in this Proxy Statement.

To be admitted to the meeting, you must bring:



photo identification; and



proof of ownership of your shares as of the record date, such as
a letter or account statement from your bank or broker.

What happens if
the Annual Meeting is postponed or adjourned?

Your proxy will remain valid and may be voted when the postponed
or adjourned meeting is held. You may change or revoke your
proxy until it is voted.

Could other
matters be decided at the Annual Meeting?

We are not aware of any matters to be presented other than those
described in this Proxy Statement. If any

other matters properly arise at the meeting, your proxy,
together with the other proxies received, will be voted at the
discretion of the proxy holders designated on the proxy card.
For further information, see Other Matters - Other
Business in this Proxy Statement.

Where can I find
vote results after the Annual Meeting?

We intend to publish final vote results in our Quarterly Report
on
Form 10-Q
for the first quarter of 2007.

Do any
shareholders beneficially own more than 5% of Merrill
Lynchs common stock?

Yes. According to public filings, State Street Bank and
Trust Company, as trustee of certain of our employee
benefit plans and as trustee and discretionary advisor to
certain unaffiliated accounts, and AXA and certain related
entities may be deemed to beneficially own more than 5% of our
common stock.

For further information, see Beneficial Ownership of Our
Common Stock - Owners of More than 5% of Our Common
Stock in this Proxy Statement.

Are proxies being
solicited by any manner other than by this Proxy
Statement?

Yes. Georgeson Shareholder Communications Inc. has been retained
to act as a proxy solicitor. Some of our Directors, officers or
employees, without additional compensation, also may solicit
your vote in person, by telephone or by other means.

Who will pay the
expenses incurred in connection with the solicitation of my
vote?

We pay the cost of preparing proxy materials and soliciting your
vote. We also pay all Annual Meeting expenses.

We reimburse brokers, including our broker-dealer subsidiary and
other nominees for the cost of mailing materials to beneficial
owners of our common stock under the rules of The New York Stock
Exchange, Inc. (NYSE).

We will pay our proxy solicitor an anticipated fee of $60,000
plus expenses.

If you vote by telephone or the internet, you will pay any
telephone or internet access charges.

Will Merrill
Lynchs independent registered public accounting firm
participate in the Annual Meeting?

Yes. Representatives of Deloitte & Touche LLP will be
present at the meeting and will be available to answer
questions. Deloitte & Touche LLP was our independent
registered public accounting firm for the 2006 fiscal year and
the Audit Committee of the Board of Directors has approved its
appointment as our independent registered public accounting firm
for the 2007 fiscal year.

What is
householding?

To save printing and mailing costs and eliminate unwanted mail
for our shareholders, we have adopted a procedure, permitted
under the rules of the Securities and Exchange Commission (SEC),
called householding. Under this procedure, we will send one copy
of the 2006 Annual Report and this Proxy Statement to the
address of any household at which two or more shareholders
holding shares in street name reside if the shareholders appear
to be members of the same family. We will follow this procedure
unless one of the shareholders at the relevant address notifies
us that he or she wishes to receive a separate copy.

Each shareholder who holds shares in street name will continue
to receive a voter instruction form. Shareholders who hold our
shares in street name can request further information on
householding through their banks, brokers or other holders of
record.

Householding does not in any way affect the mailing of dividend
checks to shareholders.

What should I do
if I want to opt out of householding treatment for future annual
meetings?

If you hold your shares in street name, you can opt out of
householding treatment by contacting your bank, broker or other
holder of record.

What should I do
if I want to request householding treatment for future annual
meetings?

If you hold your shares in street name and you received more
than one copy of the 2006 Annual Report and this Proxy
Statement, you can elect to receive a single set of proxy
materials by contacting your bank, broker or other holder of
record.

How can I receive
copies of Merrill Lynchs proxy materials?

To request copies of the 2006 Annual Report and this Proxy
Statement, access our Investor Relations website at
www.ir.ml.com or dial
(866) 607-1234.

Can I view
Merrill Lynchs proxy materials over the
internet?

Yes. This Proxy Statement and the 2006 Annual Report are posted
on our Investor Relations website at www.ir.ml.com. You also can
use this website to view our other filings with the SEC,
including our Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006 (2006
Form 10-K).

Can I receive
materials for future annual meetings over the
internet?

Yes. You can elect to view future proxy statements and annual
reports over the internet instead of receiving paper copies in
the mail. If you make this election, you will receive an
e-mail
message shortly after the proxy statement is released containing
the internet link to access our proxy statement and annual
report. The
e-mail also
will include instructions for voting on the internet.

Opting to receive proxy materials electronically will save us
the cost of printing and mailing these documents to you.

In order to receive these materials electronically, you must
follow the applicable procedure below:

Holders of record - If you are a holder of record
you can choose to receive our proxy statements and annual
reports electronically by following the instructions included
with your proxy card.

Street name holders - If your shares are held in street
name, please review the information provided in the materials
mailed to you by your bank, broker or other holder of record to
determine whether materials can be sent to you electronically or
if electronic voting is available to you.

How can I obtain
copies of Merrill Lynchs corporate governance
documents?

You may obtain a copy of our Certificate of Incorporation and
By-Laws, the charter for any of our Board Committees, the
Corporate Governance Guidelines, the Guidelines for
Business Conduct, the Code of Ethics for Financial
Professionals, the Director Independence Standards
and the Related Party Transactions Policy by
downloading these documents from the Corporate Governance
section of our Investor Relations website (Corporate Governance
Website), which can be accessed at the address set forth in this
Proxy Statement, or by contacting our Corporate Secretary. For
further information about our corporate governance, see
Corporate Governance in this Proxy Statement.

How can I contact
the Corporate Secretary?

You may contact our Corporate Secretary

by mail at:

Judith A. Witterschein

Corporate Secretary

Merrill Lynch & Co., Inc.

222 Broadway, 17th floor

New York, NY 10038-2510

by
e-mail at:

corporate_secretary@ml.com

or by telephone at:

(212) 670-0432

How can I access
the Corporate Governance Website?

The Corporate Governance Website is located at the Corporate
Governance section of our Investor Relations website at
www.ir.ml.com.

Our Board of Directors consists of 12 directors, divided into
three classes. One class of Directors is elected each year and
each class serves for a term of three years. Set forth below is
information regarding each Director, which is based on materials
each of them provided for this Proxy Statement.

The Board of Directors has nominated each of the persons named
below for a three-year term ending in 2010. Each of the nominees
has indicated his or her intention to serve if elected. Should
any of the Director nominees be unable to take office at the
Annual Meeting, your shares will be voted in favor of another
person or other persons nominated by the Board of Directors.
Each Director will hold office until his or her successor has
been elected and qualified or until the Directors earlier
resignation or removal.

Position,
principal occupation,

Name and
age

business
experience and directorships

John D. Finnegan (58)

Chairman of the Board,
President and Chief Executive Officer of The Chubb
Corporation

 Director
since 2004

 Chairman
of the Board of The Chubb Corporation, a property and casualty
insurance company, since 2003

 President
and Chief Executive Officer of The Chubb Corporation since 2002

 Executive
Vice President of General Motors Corporation, a company
primarily engaged in the development, manufacture and sale of
automotive vehicles, from 1999 to 2002

 Chairman
and President of General Motors Acceptance Corporation, a
financing subsidiary of General Motors Corporation, from 1999 to
2002

Joseph W. Prueher
(64)

Corporate Director; Former U.S.
Ambassador to the Peoples Republic of China

 Director
since 2001

 Consulting
Professor at the Stanford University Center for International
Security and Cooperation since 2001

 U.S.
Ambassador to the Peoples Republic of China from 1999 to
2001

 Lecturer
and Senior Advisor to the Stanford-Harvard Defense Project since
1999

 U.S.
Navy Admiral (Retired), Commander-in-Chief of U.S. Pacific
Command from 1996 to 1999

 Other
Public Company Directorships: Emerson Electric Company; Fluor
Corporation; and DynCorp International

 Other
Directorships: McNeil Technologies, Inc.; New York Life
Insurance Company; and The Wornick
Company

 Senior
Vice President of Warner Communications, predecessor to Time
Warner Inc., responsible for business strategy, mergers,
acquisitions and divestitures from 1982 to 1985

Aulana L. Peters (65)

Corporate Director; Retired
Partner of Gibson, Dunn & Crutcher LLP

 Director
since 1994

 Partner
in the law firm of Gibson, Dunn & Crutcher LLP from 1980 to
1984 and from 1988 to 2000

 Member,
International Public Interest Oversight Board, an entity charged
with overseeing the development of, and compliance with,
international auditing, assurance and ethics standards issued by
the International Federation of Accountants, since 2005

The following directors will retire at the Annual Meeting in
accordance with our Corporate Governance Guidelines:

Jill K. Conway, age 72, has served as a Director since
1978. Mrs. Conway is the Lead Independent Director of the
Board of Directors. She has been a Visiting Scholar with the
Massachusetts Institute of Technology since 1985; serves on the
Boards of Directors of Colgate-Palmolive Company and NIKE, Inc.;
and was President of Smith College from 1975 to 1985.

David K. Newbigging, age 73, has served as a Director since
1996. Mr. Newbigging has been Chairman of Synesis Life
Limited, Synesis Pensions Limited and Synesis Finance Limited,
U.K. - based entities which provide solutions for
insurance and corporate pension fund liabilities, since 2006;
and Chairman of the Board of Talbot Holdings Limited, a non-life
insurance company whose operations are U.K. - based,
since 2003. Mr. Newbigging was Chairman of the Board of
Friends Provident plc, a U.K. - based life assurance
company, from 2001 to 2005; Chairman of Friends Provident
Life Office, a U.K. - based financial services group
and the predecessor to the Friends Provident plc, from 1998 to
2001; Chairman of the Board of Equitas Holdings Limited, the
parent company of a U.K. - based group of reinsurance
companies, from 1995 to 1998; Chairman of the Board of Rentokil
Group plc, a U.K. - based international support
services company, from 1987 to 1994; and Chairman of the Board
and Senior Managing Director of Jardine, Matheson & Co.
Limited, a Hong Kong - based international trading,
industrial and financial services group, from 1975 to 1983.

The Audit Committee of the Board of Directors has appointed
Deloitte & Touche LLP as our independent registered
public accounting firm for the 2007 fiscal year. We are
submitting the selection of our independent registered public
accounting firm for shareholder ratification at the Annual
Meeting.

The Audit Committee will consider the outcome of this vote in
its decision to appoint an independent registered public
accounting firm next year; however, since our By-Laws do not
require that our shareholders ratify the appointment of our
independent registered public accounting firm, the Audit
Committee is not bound by the shareholders decision. Even
if the selection is ratified, the Audit Committee, in its sole
discretion, may change the appointment at any time during the
year if it determines that such a change would be in the best
interests of our Company and our shareholders.

A representative of Deloitte & Touche LLP will attend
the Annual Meeting. The representative will be available to
respond to appropriate questions from shareholders.

The Board of
Directors recommends a vote FOR
the ratification of the appointment of Deloitte &
Touche LLP
as our Independent Registered Public Accounting Firm.

Mrs. Evelyn Y. Davis, Watergate Office Building, 2600
Virginia Ave., N.W., Suite 215, Washington, D.C. 20037, who
holds 900 shares of our common stock, has given notice of
her intention to propose the following resolution at the Annual
Meeting:

RESOLVED: That the stockholders of Merrill Lynch,
assembled in Annual Meeting in person and by proxy, hereby
request the Board of Directors to take the necessary steps to
provide for cumulative voting in the election of Directors,
which means each stockholder shall be entitled to as many votes
as shall equal the number of shares he or she owns multiplied by
the number of Directors to be elected, and he or she may cast
all of such votes for a single candidate, or any two or more of
them as he or she may see fit.

REASONS: Many states have mandatory cumulative
voting, so do National Banks.

In addition, many corporations have adopted cumulative
voting.

Last year the owners of 277,099,555 shares,
representing approximately 40.47% of shares voting, voted FOR
this proposal.

If you AGREE, please mark your proxy FOR this
resolution.

The Board of
Directors recommends a vote AGAINST
the adoption of Shareholder Proposal 1.

Managements
Statement in Opposition

A similar proposal has been rejected by our shareholders at each
of our last 21 annual meetings.

allow for the election of Directors by small groups with special
interests;



result in Directors being elected who feel an obligation to
represent the special interest groups that elected them,
regardless of whether the furtherance of those groups
interests would benefit all of our shareholders generally; and



create factionalism among Board members and undermine their
ability to work together effectively.

We note that in order to minimize the risks of such
divisiveness, and the consequent risk of possible different
understandings of their responsibilities among our Directors,
we, like most other major corporations, elect Directors by
allowing each share of common stock to have one vote for each
Board seat. We believe this method ensures that each Director is
accountable to all of our shareholders and reduces the risk of
factionalism on the Board.

To further ensure Director accountability to all of our
shareholders, last year our Board adopted a majority voting
policy. The policy provides that, in an uncontested election,
any nominee for Director who receives more withhold votes
than for votes shall promptly tender his or her
resignation to the Board of Directors. See Corporate
Governance - Significant Board Practices - Voting for
Directors in this Proxy Statement for further information
about our majority voting policy.

For the reasons
stated above, the Board of Directors recommends a vote
AGAINST the adoption of Shareholder Proposal 1.

The AFSCME Employees Pension Plan, 1625 L Street, N.W.,
Washington, D.C., 20036, holder of 5,855 shares of common
stock, has given notice of its intention to propose the
following resolution at the Annual Meeting. Unitarian
Universalist Association of Congregations, 25 Beacon Street,
Boston, MA 02108, holder of 2,700 shares of our common
stock; Congregation of Divine Providence, PO Box 37345, San
Antonio, TX 78237, holder of 1,500 shares of our common
stock; Congregation of Benedictine Sisters of Perpetual
Adoration, Benedictine Monastery, 31970 State Hwy. P., Clyde, MO
64432-8100,
holder of 820 shares of our common stock; and Congregation
of the Sisters of Charity of the Incarnate Word, 4503 Broadway,
San Antonio, TX 78209, holder of 5,200 shares of our common
stock, have indicated their intention to co-sponsor this
proposal.

RESOLVED, that shareholders of Merrill Lynch urge the board of
directors to adopt a policy that Merrill Lynch shareholders be
given the opportunity at each annual meeting of shareholders to
vote on an advisory resolution, to be proposed by Companys
management, to ratify the compensation of the named executive
officers (NEOs) set forth in the proxy
statements Summary Compensation Table (the
SCT) and the accompanying narrative disclosure of
material factors provided to understand the SCT (but not the
Compensation Discussion and Analysis). The proposal submitted to
shareholders should make clear that the vote is non-binding and
would not affect any compensation paid or awarded to any NEO.

Supporting
Statement

In our view, senior executive compensation at Merrill Lynch has
not always been structured in ways that best serve
shareholders interests. For example, in 2005 Chairman and
CEO Stanley ONeal received $44,021 in tax
gross-up
benefits and $163,685 representing the cost for the
required use of company aircraft. And each of the
five named executive officers in the proxy statement received in
excess of $15 million in total compensation for 2005.

We believe that existing U.S. corporate governance arrangements,
including SEC rules and stock exchange listing standards, do not
provide shareholders with enough mechanisms for providing input
to boards on senior executive compensation. In contrast to U.S.
practices, in the United Kingdom, public companies allow
shareholders to cast an advisory vote on the
directors remuneration report, which discloses
executive compensation. Such a vote isnt binding, but
gives shareholders a clear voice that could help shape senior
executive compensation.

Currently U.S. stock exchange listing standards require
shareholder approval of equity-based compensation plans; those
plans, however, set general parameters and accord the
compensation committee substantial discretion in making awards
and establishing performance thresholds for a particular year.
Shareholders do not have any mechanism for providing ongoing
feedback on the application of those general standards to
individual pay packages. (See Lucian Bebchuk &
Jesse Fried, Pay Without Performance 49 (2004))

Similarly, performance criteria submitted for shareholder
approval to allow a company to deduct compensation in excess of
$1 million are broad and do not constrain compensation
committees in setting performance targets for particular senior
executives. Withholding votes from compensation committee
members who are standing for reelection is a blunt and
insufficient instrument for registering dissatisfaction with the
way in which the committee has administered compensation plans
and policies in the previous year.

Accordingly, we urge Merrill Lynchs board to allow
shareholders to express their opinion about senior executive
compensation at Merrill Lynch by establishing an annual
referendum process. The results of such a vote would, we think,
provide Merrill Lynch with useful information about whether
shareholders view the companys senior executive
compensation, as reported each year, to be in shareholders
best interests.

We urge shareholders to vote for this proposal.

The Board of
Directors recommends a vote AGAINST
the adoption of Shareholder Proposal 2.

Managements
Statement in Opposition

The proponent brought a similar proposal at last years
annual meeting. That proposal was defeated by a substantial
majority of the votes cast.

The Board recognizes our shareholders interest in
executive compensation practices, and always exercises great
care in determining and disclosing executive compensation. The
Company is also in ongoing direct communication with its
shareholders and the Chair of the Management Development and
Compensation Committee (MDCC) and the Lead Independent
Director have made themselves available for direct communication
with shareholders.

The MDCC follows a performance-based discipline in determining
compensation for the Chief Executive Officer (CEO) and other top
executives. At the beginning of the year, the MDCC establishes
quantitative and qualitative objectives for the CEO and other
executives for the coming year based upon agreed plans for
continued growth and the delivery of shareholder value. These
objectives include specific financial targets and specified
progress towards other strategic and leadership goals. In
determining annual CEO compensation, the MDCC exercises its
judgment based upon a review of financial measures and an
assessment of performance against these objectives. This
involves consideration of overall firm financial results and the
MDCCs assessment of the Companys financial
performance relative to its competitors. The MDCC also examines
actual and projected peer group compensation amounts to refine
its analysis and arrive at a final determination. In order to
align executive and shareholder interests and support long-term
value creation, 60% of total annual compensation is paid in
stock

that is subject to forfeiture during a four-year vesting period.
An evaluation of CEO compensation in light of the growth in
earnings per share over the last four years demonstrates the
linkage of pay to performance.

In 2006, our Company completed the most successful year in its
history, reflecting the successful execution of our growth
strategy. We reported record full year net revenues, net
earnings and earnings per diluted share on an operating basis
(excluding the one-time net gain arising from the closing of the
merger between Merrill Lynch Investment Managers and BlackRock,
Inc. in the third quarter and the one-time non-cash compensation
costs recorded in the first quarter). Net revenues grew to
$32.7 billion, up 26% from 2005 and our net earnings were
$7.6 billion, up 48%. On the same basis, diluted earnings
per share increased to $7.68, up 49% from the prior year and
return on equity increased by 5.6 percentage points to
21.6%. These results were reflected in our stock price, which
increased 37.5% during the year. We also announced a 40%
dividend increase on January 18, 2007.

The proponent urges adoption of the proposal noting that, in the
United Kingdom, the Directors remuneration report is
submitted for a vote by shareholders. We understand that, rather
than advocating a broad based application of this practice to
all U.S. companies, the proponent has introduced the proposal at
a small number of U.S. companies, including Merrill Lynch. We
are concerned that adopting this practice at Merrill Lynch alone
could put our Company at a competitive disadvantage in
recruiting and retaining talent and negatively affect
shareholder value. For further information, see Executive
Compensation - Compensation Discussion and Analysis
in this Proxy Statement.

For the reasons
stated above, the Board of Directors recommends a vote
AGAINST the adoption of Shareholder Proposal 2.

The AFL - CIO Reserve Fund, 815 Sixteenth Street, N.W.,
Washington, DC 20006, holder of 600 shares of our common
stock, has given notice of its intention to propose the
following resolution at the Annual Meeting:

RESOLVED, that the shareholders of Merrill Lynch &
Company, Inc. (the Company) urge the Board of
Directors to adopt a policy that a significant portion of future
equity compensation grants to senior executives shall be shares
of stock that require the achievement of performance goals as a
prerequisite to vesting (performance-vesting shares).

This policy shall apply to existing employment agreements and
equity compensation plans only if the use of performance-vesting
shares can be legally implemented by the Company, and will
otherwise apply to the design of all future plans and agreements.

Supporting
Statement

We believe that our Companys compensation policies should
encourage the ownership of stock by senior executives in order
to align their interests with those of shareholders. To achieve
this goal, we favor granting senior executives actual shares of
stock that vest only after meeting specified performance goals.
In our opinion, performance-vesting shares are a better form of
equity compensation than fixed-price stock options or
time-vesting restricted stock.

Fixed-price stock option grants provide senior executives with
incentives that may not be in the best interests of long-term
shareholders. In our view, stock option grants promise
executives all the benefit of share price increases with none of
the risk of share price declines. This asymmetrical incentive
structure can reward executives for share price volatility, a
measure of investment risk. Stock options can also reward
short-term decision-making because many executives options
can be exercised just one year after the grant date.

Furthermore, we believe that stock options can create a strong
incentive to manipulate a companys stock price through
questionable or even fraudulent accounting.

Leading investors and regulators have questioned the use of
stock options to compensate executives. Berkshire Hathaway CEO
Warren Buffet has characterized fixed-price stock options as
really a royalty on the passage of time. Former
Federal Reserve Chairman Alan Greenspan blamed poorly-structured
options for the infectious greed of the 1990s,
because they failed to properly align the long-term
interests of shareholders and managers.

Similarly, we oppose granting executives time-vesting restricted
stock that does not include any performance requirements. In our
view, time-vesting restricted stock rewards tenure, not
performance. Instead, we believe vesting requirements should be
tailored to measure each individual executives performance
through disclosed benchmarks, in addition to the Companys
share price. To align their incentives with those of long-term
shareholders, we also believe that senior executives should be
required to hold a significant portion of these
performance-vesting shares for as long as they remain executives
of the Company.

Executive compensation consultant Pearl Meyer has said if
a company is going to issue restricted stock grants as a way of
making sure executives are owners rather than optionees, the
grant should be earned on a performance basis - it
shouldnt be just a giveaway. Former SEC chairman
Richard Breeden has stated that there is not a strong
reason for granting restricted stock rather than simply paying
cash unless there are performance hurdles to vesting.

The Board of
Directors recommends a vote AGAINST
the adoption of Shareholder Proposal 3.

Managements
Statement in Opposition

The Management Development and Compensation Committee of the
Board (MDCC) applies a strict performance-based discipline in
determining compensation for our Chief Executive Officer and
other top executives. As described in Executive
Compensation - Compensation Discussion and Analysis
in this Proxy Statement, our compensation programs emphasize pay
for performance by paying more than 95% of total annual
compensation for our executives in the form of an annual bonus
tied directly to the achievement of individual, business unit
and overall Company performance measured against objectives that
are established at the beginning of the year. Moreover, instead
of paying this bonus all in cash, we deliver 60% of total annual
compensation in the form of stock awards that vest over a
four-year period. This practice emphasizes stock ownership to
support alignment with shareholders in a business that involves
taking risk in financial markets that are often volatile. It
also supports retention of key executives in the face of intense
competitive pressure. For further information about competition
for talent in the securities industry, see Executive
Compensation - Compensation Discussion and Analysis -
Introduction in this Proxy Statement.

Since our stock awards are fundamentally part of annual pay for
the achievement of concrete results in the prior fiscal year,
tying a portion of the awards to future performance presents
certain risks. Linking a large portion of the award to an
additional future financial measure would amount to a
requirement that the executive earn it again. Such a
requirement could lead to the departure of key employees in
light of the competitive environment for talent in our industry.
Awards based upon future performance typically need to be
incremental to an industry competitive bonus or provide
significant potential upside to counter the risk of loss. In
addition, because our industry is cyclical and the markets we
operate in can be highly volatile, overemphasizing this type of
award can have unintended and adverse consequences. If markets
turn down and the awards perform poorly, competitive pressure
could result in executive departures or create the need to pay
additional current compensation, while exceptional performance
could lead to a windfall.

In 2006, we introduced the Managing Partner Incentive Program
(MPP), a three-year performance-based program designed to
increase our annual return on equity (ROE) for our 2006, 2007
and 2008 fiscal years over ROE for 2005. Participants and the
Company each contribute to the program, by means of a reduction
of annual stock based bonus awards and a Company match. The
awards are subject to reduction or complete forfeiture if
certain ROE goals are not met, but there is also upside
opportunity if target goals are exceeded. The MPP is more fully
described in Executive Compensation - Compensation
Discussion and Analysis - Long-Term Performance Based
Awards - Managing Partner Incentive Program (MPP) in
this Proxy Statement. In its first year, the MPP has helped
drive a 5.6 percentage point improvement in ROE and a 37.5%
increase in the stock price, increasing our market
capitalization by approximately $20 billion.

Management and the MDCC are continuing to explore approaches to
providing incentives for long-term objectives through
performance-based programs to follow the first MPP. We believe
that the MPP, coupled with our disciplined performance-based
approach to annual pay, is responsive to the proponents
objectives while at the same time takes into account the unique
industry factors discussed above. Further, we believe that it is
essential for the MDCC to retain its ability to design and
implement compensation programs that enable us to attract and
retain the executives necessary for our success.

For the reasons
stated above, the Board of Directors recommends a vote
AGAINST the adoption of Shareholder Proposal 3.

The Board of Directors believes that good corporate governance
is a critical factor in achieving business success and has long
adhered to best practices in corporate governance in fulfilling
its responsibilities to shareholders. Highlights of our
corporate governance practices are described below. For further
information, please refer to the Corporate Governance Website.

Director Independence Standards. For a
Director to be considered independent under NYSE rules, the
Board of Directors must determine that the Director does not
have any direct or indirect material relationship with Merrill
Lynch other than as a Director. The Board of Directors has
adopted categorical standards to assist in making its
determinations of director independence required by the NYSE
rules. The Director Independence Standards, which are
consistent with the NYSE rules, describe certain relationships
between the Directors and the Company that the Board of
Directors has determined to be categorically immaterial. The
Standards are attached as Exhibit A. The
Standards also may be found on the Corporate Governance
Website and are available to any shareholder upon request to the
Corporate Secretary.



Board Independence. In January 2007,
the Board of Directors considered transactions and relationships
between the Company and our executive management and
(i) each non-management Director and his or her
organizational affiliations and (ii) any members of his or
her immediate family. The Board affirmatively determined that
the following Directors, constituting all Directors except
Mr. ONeal, our Chairman and Chief Executive Officer,
meet the criteria of our Director Independence Standards,
and are, therefore, independent: Armando M. Codina, Virgis W.
Colbert, Jill K. Conway, Alberto Cribiore, John D.
Finnegan, Judith Mayhew Jonas, David K. Newbigging, Aulana L.
Peters, Joseph W. Prueher, Ann N. Reese and Charles O. Rossotti.
None of these Directors had relationships with the Company
except those that the Board has determined to be categorically
immaterial as set forth in the Director Independence
Standards.

The following table describes, by category, the
transactions and relationships that were evaluated by the Board
in reaching its determination that each of the non-management
Directors is independent. In all cases, payments, revenues or
contributions referred to in the table involved amounts well
below the thresholds contained in the Director Independence
Standards. In addition, the contributions referred to in the
table, which do not include contributions made as part of our
broad-based matching gifts program, were made in the ordinary
course of our corporate charitable giving and represent an
immaterial portion of such charitable giving. In 2006, we
contributed to more than 3,000 not-for-profit organizations.

Key to Descriptions of Client
Relationships and Charitable Contributions:

A:

Brokerage accounts maintained in
the ordinary course of business on non-preferential terms

B:

Mortgage loan(s) issued by a
banking subsidiary in the ordinary course of business on
non-preferential terms

C:

Contributions, made in the ordinary
course of our corporate charitable giving, to a not-for-profit
entity for which the Director served as a non-executive director
or trustee

Employment/

Business

Client

Charitable

Name

Independent

Compensation (1)

Relationships

Relationships

Contributions (2)

Armando M. Codina

Yes

None

None

A

None

Virgis W. Colbert

Yes

None

None

None

None

Jill K.
Conway (3)

Yes

None

None

A and B

C

Alberto Cribiore

Yes

None

None

A

None

John D. Finnegan

Yes

None

Ordinary course investment
banking and sales and trading business with The Chubb
Corporation, for which Mr. Finnegan serves as chief executive officer

Certain insurance products and services purchased in the ordinary course
of business from The Chubb Corporation

A

C

Judith Mayhew Jonas

Yes

Nominal annual fees, prior to 2006,
for service on the Companys external diversity council.
Mrs. Jonas continued to serve on the council on an unpaid
basis through September 2006

None

A

None

David K.
Newbigging (3)

Yes

None

None

None

C

Aulana L. Peters

Yes

None

None

A

None

Joseph W. Prueher

Yes

None

None

A and B

None

Ann N. Reese

Yes

None

None

None

None

Charles O. Rossotti

Yes

None

None

A

C

(1)

Compensation for service as a
Director is not considered in making independence determinations.

(2)

The contributions referred to in
this column, which do not include contributions made as part of
our broad-based matching gifts program, were made in the
ordinary course of our corporate charitable giving and represent
an immaterial portion of such charitable giving. In 2006, we
contributed to more than 3,000
not-for-profit
organizations.

(3)

In accordance with our Director
retirement policy, Mrs. Conway and Mr. Newbigging will
retire as Directors at the Annual Meeting.

In January 2006, the Board of Directors determined that
Heinz-Joachim Neubürger, a former Director, was
independent. In making its determination, the Board reviewed
payments between the Company and Siemens AG and brokerage
services provided by the Company to Mr. Neubürger in
the ordinary course of business on non-preferential terms.
Mr. Neuburger had no relationships with the Company except
those that the Board has determined to be categorically
immaterial as set forth in the Director Independence
Standards. Mr. Neubürger resigned from the Board
on May 1, 2006 concurrent with his resignation as Chief
Financial Officer of Siemens AG, in accordance with our
Corporate Governance Guidelines.



Board Committee Independence; Audit Committee Financial
Expert. All of the standing committees of the
Board are composed solely of independent Directors. These
committees are: the Audit Committee; the Finance Committee; the
Management Development and Compensation Committee; the
Nominating and Corporate Governance Committee; and the Public
Policy and Responsibility Committee. Two of our current Audit
Committee members  Mrs. Reese and
Mr. Rossotti  are audit committee financial
experts, as defined in the SEC rules, and all members of the
Audit Committee meet the additional audit committee independence
standards required by the applicable SEC and NYSE rules. All
members of the Audit Committee meet the financial literacy
requirements of the NYSE and at least one member has accounting
or related financial management expertise, as required by the
applicable SEC and NYSE rules. For further information about our
Board Committees, see Board Committees in this Proxy
Statement.



Director Qualifications. The Nominating
and Corporate Governance Committee is responsible for
identifying, reviewing, assessing and recommending to the Board
candidates to fill any Board vacancies. This Committee has
established guidelines that set forth the criteria considered in
evaluating Board candidates. These guidelines are an exhibit to
our Corporate Governance Guidelines. For a
discussion of this process, see Director Nomination
Process in this Proxy Statement.



Experience and Diversity. Our Board of
Directors is composed of individuals with experience in the
fields of business, law, education, government, military and
diplomatic service. Several of our Board members have
international experience, and all have high moral and ethical
character. The Board includes four female Directors and four
minority Directors.

Board Committee Charters. The
Committees of the Board of Directors have operated pursuant to
written charters since the mid-1970s, which have been revised
from time to time. We believe that the charters of our Board
Committees reflect current best practices in corporate
governance. You can find all of our Board Committee charters on
the Corporate Governance Website. Copies of the Committee
charters are available to any shareholder upon request to the
Corporate Secretary.



Corporate Governance Guidelines. The
Board of Directors has documented our corporate governance
practices and adopted the Corporate Governance
Guidelines, which you can find on the Corporate Governance
Website. Copies of the Guidelines are available to any
shareholder upon request to the Corporate Secretary.



Guidelines for Business Conduct. The
Guidelines for Business Conduct were originally adopted
in 1981 to emphasize our commitment to the highest standards of
business conduct. The Guidelines also set forth
information and procedures for employees to report ethical or
accounting concerns, misconduct or violations of the
Guidelines in a confidential manner. You can find the
Guidelines, which were adopted and designated by the
Board of Directors as our Code of Ethics for Directors,
Officers and Employees, on the Corporate Governance Website.
Copies of the Guidelines are available to any shareholder
upon request to the Corporate Secretary.



Code of Ethics for Financial
Professionals. The Board of Directors adopted
our Code of Ethics for Financial Professionals in 2003.
The Code, which applies to all of our professionals who
participate in the Companys

public disclosure process, supplements our Guidelines for
Business Conduct and is designed to promote honest and
ethical conduct, full, fair and accurate disclosure and
compliance with applicable laws. Our Code of Ethics for
Financial Professionals may be found on the Corporate
Governance Website. Copies of the Code are available to
any shareholder upon request to the Corporate Secretary.



Procedures for Handling Accounting
Concerns. The Audit Committee has adopted
procedures governing the receipt, retention and handling of
concerns regarding accounting, internal accounting controls or
auditing matters that are reported by employees, shareholders
and other persons. Employees may report such concerns
confidentially and anonymously by using our Ethics Hotline, as
directed in our Guidelines for Business Conduct. All
others may report such concerns in writing to the Board of
Directors or the Audit Committee, care of our Corporate
Secretary.



Related Party Transactions Policy. Our
Board of Directors has adopted a written policy governing the
approval of related party transactions. Related Party
Transactions are transactions in which our Company is a
participant, the amount involved exceeds $120,000 and a related
party has or will have a direct or indirect material interest.
Related Parties of our Company include Directors
(including nominees for election as Directors), executive
officers, 5% shareholders of our Company (other than
shareholders eligible to report their holdings on
Schedule 13G) and the immediate family members of these
persons. Under the Related Party Transactions Policy, the
General Counsel and the Corporate Law Department will review
potential Related Party Transactions to determine if they are
subject to the Policy. If so, the transaction will be
referred for approval or ratification to: (i) the Chief
Executive Officer (CEO) and the General Counsel, in
the case of a transaction involving an executive officer other
than the CEO or the General Counsel; (ii) to the CEO, in
the case of a transaction involving the General Counsel; or
(iii) to the Nominating and Corporate Governance Committee,
in the case of a transaction involving the CEO, a Director or a
5% shareholder. In determining whether to approve a Related
Party Transaction, the appropriate approving body will consider,
among other things, the fairness of the proposed transaction,
whether there are business reasons to proceed, and whether the
transaction would impair the independence of an outside Director
or present an improper conflict of interest for a Director or
executive officer. Transactions that are approved by the CEO and
the General Counsel will be reported to the Nominating and
Corporate Governance Committee at its next meeting. The
Nominating and Corporate Governance Committee has authority to
oversee the Policy and to amend it from time to time. You
can find the Related Party Transactions Policy on the
Corporate Governance Website. Copies of the Policy are
available to any shareholder upon request to the Corporate
Secretary.

SEC rules require that we identify any Related Party
Transactions that do not require review, approval or
ratification under our policy or any situations where such
policies and procedures have not been followed. There were no
such transactions or situations since the beginning of the 2006
fiscal year.

Director Attendance at Meetings. Our
Board of Directors held twelve meetings in the 2006 fiscal year.
As stated in our Corporate Governance Guidelines,
Directors are expected to attend all Board meetings and meetings
of the Board Committees on which they serve. In the 2006 fiscal
year, each of our Directors attended 75% or more of the total
number of meetings of the Board of Directors and of the meetings
of the Board Committees on which he or she served. Our
Corporate Governance Guidelines also state that all
Directors are expected to attend every annual meeting. Each
Director then in office attended the 2006 annual meeting.



Lead Independent Director. In 2005, our
Board of Directors established the position of Lead Independent
Director. The Lead Independent Director is elected by the Board
and:

(i)

presides at all Board meetings when the Chairman is not present;

(ii)

serves as a liaison between the non-management Directors and the
Chairman in matters relating to the Board as a whole (although
all non-management Directors are encouraged to freely
communicate with the Chairman and other members of management at
any time);

is available, at reasonable times and intervals, for
consultation and direct communication with shareholders.

Jill K. Conway currently serves as the Boards Lead
Independent Director.



Voting for Directors. In 2006, the
Board amended our Corporate Governance Guidelines to
require that in any uncontested election, any nominee for
Director who receives more withhold votes than for
votes shall promptly tender his or her resignation to the Board
of Directors following certification of the shareholder vote.
The Nominating and Corporate Governance Committee will make a
recommendation to the Board of Directors as to whether to accept
or reject the tendered resignation, or whether other action
should be taken. The Board of Directors will act on the tendered
resignation, taking into account the Nominating and Corporate
Governance Committees recommendation, and will publicly
disclose its decision regarding the tendered resignation and the
rationale behind the decision, within 90 days of the
certification of the election results.



Private Executive Sessions of Non-management
Directors. Our non-management Directors meet
at regularly scheduled executive sessions without management at
least three times per year. The Lead Independent Director chairs
these executive sessions.



Director Retirement. The customary
retirement date for non-management Directors occurs at the
annual meeting held in the calendar year following the
Directors 72nd birthday. The Board has not adopted
term limits for Directors. In the event of a material change in
their qualifications or status, Directors are required to offer
their resignation.



Advance Materials. Information
important to the Directors understanding of the business
or matters to be considered at a Board or Board Committee
meeting is, to the extent practical, distributed to the
Directors sufficiently in advance to allow careful review prior
to the meeting.



Board Self-Evaluation. The Board of
Directors conducts an annual self-evaluation that is overseen by
the Nominating and Corporate Governance Committee. This
assessment focuses on the Boards effectiveness in certain
areas, including strategic planning and financial and risk
oversight, succession planning and executive compensation,
corporate governance and Board and Board Committee structure.
The contributions of individual Directors are considered by the
Nominating and Corporate Governance Committee as part of its
determination whether to recommend their nomination for
re-election to the Board.



Director Orientation and Education
Programs. Newly elected members of the Board
of Directors are educated about our business and operations
through presentations about our business segments and primary
support areas and meetings with executive and senior management.
Board Committee members participate in specialized orientation
for each Committee on which they serve. The Board is updated on
developments in our business and markets as well as changes in
the regulatory environment through reports at Board meetings and
by communications from management between meetings. Board
members also are encouraged to participate, at our expense, in
director education programs offered by third parties.

Access to Management and
Employees. Directors have full and
unrestricted access to our management and employees.
Additionally, key members of management attend Board meetings
from time to time to present information about the results,
plans and operations of the businesses within their areas of
responsibility.



Access to Outside Advisors. The Board
and its Committees may retain counsel or consultants without
obtaining the approval of the Company. The Audit Committee has
the sole authority to retain and terminate the independent
registered public accounting firm. The Nominating and Corporate
Governance Committee

has the sole authority to retain search firms to identify
Director candidates. The Management Development and Compensation
Committee has the sole authority to retain compensation
consultants for advice to the Committee on executive
compensation matters.

Director Stock Ownership Guidelines. In
order to serve on the Board of Directors, our Directors are
required to own equity in our Company. In addition, the Board
has adopted stock ownership guidelines for non-management
Directors. These guidelines set the minimum ownership
expectations for non-management Directors at a value of
$375,000, which represents five times the Directors
current annual cash retainer of $75,000. Directors have until
the later of five years from joining the Board or from the
adoption of the requirement, in January 2005, to reach this
ownership value. Annual grants to Directors of deferred stock
units are included in the determination of the ownership
guideline amount, but stock issuable upon the exercise of stock
options held by Directors is not included. We believe that the
equity component of director compensation serves to further
align the non-management Directors with the interests of our
shareholders. For further information, see Director
Compensation and Beneficial Ownership of Our Common
Stock  Ownership by Our Directors and Executive
Officers in this Proxy Statement.



Executive and Senior Management Stock Ownership
Guidelines. The Management Development and
Compensation Committee has adopted formal stock ownership
guidelines that set minimum expectations for ownership of stock
by executive and senior management. The ownership guidelines
state that executive and senior management are expected to reach
certain levels of stock ownership  stated as a
multiple of an executives base salary  within
five years of their eligibility and are encouraged to reach the
applicable level earlier. The expected level of stock ownership
for the CEO is 15 times base salary. For other executive
officers and selected members of senior management, the expected
levels of stock ownership are ten and five times base salary,
respectively. Annual grants to executive and senior management
of restricted shares
and/or
restricted units are included in the determination of the
ownership guideline amount. Stock issuable upon the exercise of
stock options held by executives and senior management is not
considered in determining whether these guidelines have been
met. Executive and senior management are encouraged, but not
required, to hold all compensatory shares (net of taxes) until
the applicable stock ownership level is reached. For further
information, see Executive Compensation 
Compensation Discussion and Analysis and Beneficial
Ownership of Our Common Stock  Ownership by Our
Directors and Executive Officers in this Proxy Statement.



Executive Stock Retention
Guidelines. Members of executive management
and designated members of senior management are also subject to
stock retention guidelines. Executives who are subject to this
policy are required to retain 75% of the net after-tax value of
their equity holdings on an annual basis. This policy covers all
equity instruments that we grant, including any shares issued
under any performance-based instruments. Executives subject to
the policy may not sell shares unless they obtain clearance
under the policy prior to such sale. Executive officers are not
permitted to hedge their exposure to Merrill Lynch stock. For
further information, see Beneficial Ownership of Our
Common Stock  Ownership by Our Directors and
Executive Officers in this Proxy Statement.

The Nominating and Corporate Governance Committee has adopted
Board Candidate Guidelines that describe the attributes
and qualifications considered by the Committee in evaluating
Director nominees. The Board Candidate Guidelines are an
exhibit to our Corporate Governance Guidelines, which you
can find on the Corporate Governance Website and can request
from our Corporate Secretary. Among the attributes the Committee
considers are: (i) management and leadership experience;
(ii) a skilled and diverse background; (iii) integrity

Members of the Nominating and Corporate Governance Committee,
other members of the Board of Directors or members of executive
management or shareholders may, from time to time, identify
individuals for consideration as potential Director nominees. A
shareholder may identify a Director candidate for consideration
by the Nominating and Corporate Governance Committee by writing
to our Corporate Secretary. The Committee will consider all
proposed nominees in light of our Board Candidate Guidelines
and the assessed needs of the Board at the time.

Any shareholder who wishes to propose a Director nominee for
election to the Board at the Annual Meeting must ensure that
written notice is received by our Corporate Secretary not less
than 50 days or more than 75 days before the Annual
Meeting. Such notice must be provided by the holder of record.
Any shareholder who holds shares through a bank, broker or other
holder of record must instruct the record holder to submit the
required notice in a timely manner. The notice must include:

(i)

certain information about the shareholder, including the amount
of his or her holdings of our common stock and his or her
intention to appear in person or by proxy at the Annual Meeting;

(ii)

a description of any arrangements between the shareholder and
the proposed nominee pursuant to which the nominations are to be
made;

(iii)

such information about the nominee as would be required to be
disclosed under SEC rules in a proxy statement; and

(iv)

the written consent of each proposed nominee to serve as a
Director.

The Nominating and Corporate Governance Committee has retained a
director search firm to work with the Committee in identifying
potential nominees for election to the Board. The firm
identifies and evaluates potential candidates believed to
possess the qualifications and characteristics identified in our
Board Candidate Guidelines and by the Committee. The firm
also provides background information on the potential Director
nominees and, if so directed by the Committee, makes the initial
contact to assess the potential candidates interest in
exploring a Board candidacy.

Based upon the recommendation of the Nominating and Corporate
Governance Committee, the Board has nominated John D. Finnegan,
Joseph W. Prueher and Ann N. Reese for election to the Board of
Directors for a three-year term expiring in 2010.
Mr. Finnegan has served on the Board since 2004 and was
initially recommended as a Board candidate by our Chief
Executive Officer. Admiral Prueher has served on the Board since
2001 and was re-elected by shareholders to a three-year term in
2004. Mrs. Reese has served on the Board since 2004 and was
initially recommended to the Nominating and Corporate Governance
Committee as a Board candidate by one of our non-management
Directors.

There were no nominees for election as Directors at the 2006
annual meeting that were submitted by shareholders (or
shareholder groups) owning more than 5% of our common stock.

Shareholders and other interested parties may communicate with
the Board of Directors, non-management Directors and Committees
of the Board of Directors by writing to the Board, in care of
our Corporate Secretary. All written submissions that appear to
be good faith efforts to communicate with Board members about
matters involving the interests of Merrill Lynch and our
shareholders are collected and forwarded on a periodic basis to
the Board of Directors along with a summary of our actions in
response to the submissions. Concerns relating to accounting,
internal accounting controls or auditing matters are brought
immediately to the attention of our Corporate Audit Department
and are handled in accordance with the procedures established by
the Audit Committee with respect to such communications.

Membership and Meetings. The Board of
Directors has appointed five standing committees: the Audit
Committee; the Finance Committee; the Management Development and
Compensation Committee; the Nominating and Corporate Governance
Committee; and the Public Policy and Responsibility Committee.
Each of these Board Committees consists entirely of independent
Directors and operates under a written charter, which sets forth
the Committees authorities and responsibilities. For
information on how to obtain a copy of any Committee charter,
see Questions and Answers  How can I obtain
copies of Merrill Lynchs corporate governance
documents? in this Proxy Statement.

The following table shows the current membership of each of our
Board Committees during the 2006 fiscal year.

Management

Development
and

Nominating and

Public Policy
and

Audit

Finance

Compensation

Corporate

Responsibility

Committee

Committee

Committee

Governance
Committee

Committee

E. Stanley ONeal
(Chairman)

Armando M. Codina

ü

ü

Virgis W. Colbert

ü

Jill K. Conway

ü

Chair

ü

Alberto Cribiore

ü

Chair

ü

John D. Finnegan

Chair

ü

ü

Judith Mayhew Jonas

ü

ü

David K. Newbigging

Chair

Aulana L. Peters

ü

ü

Joseph W. Prueher

ü

Chair

Ann N. Reese

ü

ü

Charles O. Rossotti

ü

ü

ü

Descriptions. A brief description of
our Board Committees and certain of their principal functions
are set forth in the following sections. The descriptions are
qualified in their entirety by the full text of the Board
Committee charters.

The Audit Committee consists of five of our independent
Directors, each of whom meets the requirements for independence,
experience and expertise, including financial literacy, set
forth in the applicable rules of the SEC and the NYSE.

David K. Newbigging, the Chair of the Audit Committee since
2002, has served as a member of the Audit Committee since he
joined the Board of Directors in 1996 and served as Chair of the
Finance Committee from 2002 through 2005. The Board of Directors
has determined that Mr. Newbigging has accounting or
related financial management expertise. Mr. Newbigging has
an extensive financial background. He joined Jardine, Matheson
Group (Jardine), a diversified trading company headquartered in
Hong Kong, in 1954. He served in several countries in the Asia
Pacific Region, becoming Managing Director in 1970 and Chairman
and Chief Executive Officer of Jardine in 1975. While serving in
these positions, Mr. Newbigging supervised individuals
responsible for Jardines financial statements. Jardine
became a publicly listed company in 1961 and has grown into a
multinational diversified company with a number of publicly
listed subsidiaries and associates in several jurisdictions.
Following his retirement from Jardine, Mr. Newbigging
relocated to the United Kingdom in 1984. Since then he has been
a director and Chairman of several publicly listed companies
including Rentokil Group and Friends Provident plc, which are
both constituents of the FTSE 100 on the London Stock Exchange.
Mr. Newbigging was Chairman of the Audit Committee before
being appointed Chairman of the Board of each of Rentokil Group
and Friends Provident plc. He also served on the Board and Audit
Committee of Ocean Energy Inc., a publicly listed
U.S. company, and its predecessor company, from 1987 until
2003 and served on the Board of PACCAR Inc., a publicly listed
U.S. company, from 1999 to 2006. Mr. Newbigging has
been active in

the
not-for-profit
sector in the United Kingdom. He currently serves as Chairman of
Trustees of a large U.K.-registered charity, and has also served
as a member of the Audit Committee of that charity.
Mr. Newbigging also currently serves as Chairman of Talbot
Holdings Limited, a non-life insurance company whose operations
are based in the United Kingdom and Synesis Life Limited,
Synesis Pensions Limited, and Synesis Finance Limited, entities
that provide solutions for insurance and corporate pension fund
liabilities, whose operations are based in the United Kingdom.

The Board has determined that two of our Audit Committee
members  Mrs. Reese and
Mr. Rossotti  are audit committee financial
experts as defined in the SEC rules. The SEC rules provide that
audit committee financial experts do not have any additional
duties, obligations or liabilities and are not considered
experts under the U.S. Securities Act of 1933.

The Audit Committee met 12 times during the 2006 fiscal year.
This Committee:



appoints our independent registered public accounting firm,
reviews the scope of the audit, approves the fees and regularly
reviews the qualifications, independence and performance of the
independent registered public accounting firm;



pre-approves all audit services proposed to be rendered by any
accounting firm and all permitted non-audit services proposed to
be rendered by our independent registered public accounting firm
and the fees for such services;



meets to review and discuss our consolidated financial
statements with management and our independent registered public
accounting firm, including significant reporting issues and
judgments made in connection with the preparation of our
consolidated financial statements and the disclosures contained
in our SEC filings, under the heading Managements
Discussion and Analysis of Financial Condition and Results of
Operations;



reviews and discusses with our independent registered public
accounting firm the critical accounting policies applicable to
us and our businesses, alternative accounting treatments under
generally accepted accounting principles and other material
written communications between our independent registered public
accounting firm and management;

reviews budgeting and expense allocation processes applicable to
our securities research group to ensure compliance with legal
and regulatory requirements;



oversees the internal audit function, including participating in
the appointment of the Head of our Corporate Audit Department,
and considers the adequacy of our internal controls;



oversees managements policies and processes for managing
the major categories of risk affecting us, including
operational, legal and reputation risk and managements
actions to assess and control such risks;



oversees our compliance function and the adequacy of our
procedures for compliance with our policies, as well as with
legal and regulatory requirements; and



monitors the receipt, retention and treatment of concerns
relating to accounting, internal accounting controls and
auditing matters reported by employees, shareholders and other
interested parties.

The Finance Committee currently consists of four of our
independent Directors and met nine times during the 2006 fiscal
year. This Committee:

authorizes the issuance of preferred stock within limits set by
the Board, declares and pays dividends on preferred stock and
takes other related actions with respect to our preferred stock,
including authorizing repurchase programs; and



reviews our policies and procedures for managing exposure to
market and credit risk and, when appropriate, reviews
significant risk exposures and trends in these categories of
risk.

The Management Development and Compensation Committee
(MDCC) consists of five of our independent Directors.
Each of these Directors meets the criteria for independence set
forth in the NYSE rules, the definition of Non-Employee
Director set forth in
Rule 16b-3
under the U.S. Securities and Exchange Act of 1934 and the
definition of outside director set forth in the
regulations promulgated under Section 162(m) of the
Internal Revenue Code. The Committee met eight times during
2006. This Committee:



reviews management development and succession programs and
policies, as well as all appointments of officers with the
title Managing Partner and above (senior management), and
reviews and recommends to the Board all appointments of
executive management;



approves annual corporate goals and objectives for our Chairman
and CEO and evaluates his performance against these goals;



approves salaries and annual performance-based compensation for
the Chairman and CEO, other members of executive management and
members of senior management including the Chief Financial
Officer (CFO);



approves the aggregate dollar amounts of bonus compensation to
be paid to employees and the proportion of such dollar amounts
that will be paid in the form of stock compensation in lieu of
cash;



administers stock and stock-based compensation plans, including
approving stock bonus amounts for all employees and the terms
and conditions of such awards;



reviews compensation programs, policies and accruals to align
them with Merrill Lynchs annual and long-term goals and
the interests of its shareholders;



reviews performance evaluation and compensation policies, plans
and processes applicable to research analysts within the
securities research group to ensure compliance with legal and
regulatory requirements;



reviews and approves changes to benefit plans that result in the
issuance of stock or material changes to the benefits provided
to employees;



has sole authority to retain consultants having special
competence to assist the MDCC, including sole authority to
approve any such consultants fee and other retention terms;



reviews the section of our Proxy Statement entitled
Compensation Discussion and Analysis, discusses that
section with members of management and recommends its inclusion
in the Proxy Statement; and

discharges the responsibilities as described below under the
caption Compensation Processes and Procedures.

Compensation Processes and
Procedures. The MDCC is responsible for
approving the compensation paid to the CEO and all other members
of executive and senior management, including the CFO. The
compensation for the rest of our employees is the responsibility
of management, with general oversight from the MDCC.

The MDCC approves annual financial, strategic and leadership
performance objectives for the CEO. The CEOs performance
objectives include elements highlighted in the Companys
annual operating plan described below and many of the key
objectives of the other members of the executive management
team, including the named executive officers. During the course
of the year, the MDCC reviews the performance of the executive
management team against these objectives. This review serves as
a basis upon which the MDCC determines the compensation of the
CEO and our executive management team. The MDCC also reviews our
performance against the performance of our competitors and
against the agreed strategic priorities described below. As part
of this process, the MDCC also reviews the quarterly bonus
accruals made for performance-based compensation throughout the
year and authorizes all awards under equity-based compensation
plans.

Setting Annual Performance
Objectives. Prior to the beginning of each
fiscal year, our executive management team develops an annual
operating plan for achieving continued growth and the delivery
of shareholder value. This plan covers the anticipated
performance of our major operating businesses based on
reasonable assumptions about market conditions and sets forth
the strategic and financial goals for the coming year. This plan
is developed by executive management and is subsequently
presented to our Board of Directors for approval. The annual
operating plan represents executive managements best
estimate of our expected performance based on its assessment of
market conditions. The operating plan forms the basis of the
CEOs financial objectives to which are added agreed upon
strategic and leadership objectives (that can be short term or
span more than one year).



Financial Objectives. Specific
financial performance objectives are established each year and
can vary depending on which firm-wide financial objectives are
considered most critical or in need of reinforcement. These
objectives may be absolute - such as exceeding targeted
objectives based on the operating plan or improving
year-over-year
performance in a specific measure  or
relative  such as achieving objectives benchmarked
against the performance of Merrill Lynchs Peer Group, as
defined under the heading Executive
Compensation  Compensation Discussion and
Analysis in this Proxy Statement.



Strategic Objectives. Strategic goals
focus on penetrating new and existing market opportunities and
serving existing clients while developing new client
relationships. These goals incorporate specific criteria set for
growth and business development that are part of the
Companys strategic priorities and
three-to-five-year
plans that are reviewed periodically with the Board as part of
overarching strategic discussions.



Leadership Objectives. Leadership goals
center on talent quality and development; recruiting and
retention of key employees; diversity and inclusion; developing
and differentiating Merrill Lynchs brand worldwide; and
developing depth in the leadership team across the globe.

The MDCC considers the proposed CEO objectives at its meetings
held in January of each year and discusses the objectives with
its compensation consultant and with the CEO. The MDCC then
meets in private session, without management, to consider and
approve the proposed CEO objectives which are subsequently
reviewed with the full Board. At each of its meetings throughout
the year, the MDCC reviews
year-to-date
accomplishments and progress against these objectives. At year
end, the MDCC uses these objectives in assessing the annual
performance of the CEO, the Executive Vice Presidents and the
CFO. This assessment is the foundation of the MDCCs annual
determination of compensation that is described under the
heading Executive Compensation  Compensation
Discussion and Analysis in this Proxy Statement.

MDCC Compensation Consultant. Since
2003, the MDCC has engaged a consultant from Towers Perrin to
provide independent advice to the Committee on executive
compensation matters. The Towers Perrin consultant reports
directly to the MDCC and attends most MDCC meetings, including
private sessions relating to executive compensation. Towers
Perrin only provides advice  all actions and
decisions regarding the compensation of the named executive
officers are made by the MDCC. Under an agreement with the MDCC,
Towers Perrins consulting fees for the MDCC are based
solely on hourly billings for assignments commissioned by the
MDCC. During 2006, Towers Perrin provided discrete, routine
consulting services to two of the Companys business units,
and the Company purchased certain generic compensation reports
from Towers Perrin, unrelated to executive compensation. The
Towers Perrin MDCC consultant and his team were not involved in
providing any of these other products or services. Merrill Lynch
has been advised by Towers Perrin that the fees for these
matters represented less than one-tenth of one percent of its
2006 revenues. The MDCC has reviewed these limited services and
determined that they do not affect Towers Perrins ability
to provide independent advice to the MDCC on executive
compensation matters.

The Nominating and Corporate Governance Committee
consists of six of our independent Directors, each of whom
meets the requirements for independence set forth in the NYSE
rules. The Nominating and Corporate Governance Committee met
eight times during the 2006 fiscal year. This Committee:



identifies and recommends potential candidates to serve on the
Board and also considers Director nominees recommended by our
shareholders, with a view toward maintaining a balance of
experience and expertise among the Directors;



makes recommendations relating to the membership of Committees
of the Board of Directors;



periodically reviews the compensation and benefits of our
non-management Directors and recommends changes to our
non-management Director compensation policy for consideration by
the Board as appropriate;



develops and recommends guidelines and practices for effective
corporate governance;



oversees our related-party transactions policy;



reviews our directors and officers insurance
coverage; and



leads the Board of Directors in conducting its annual review of
the Boards performance.

The Public Policy and Responsibility Committee consists
of four of our independent Directors and met three times during
the 2006 fiscal year. This Committee oversees the
Corporations activities as a socially responsible
corporation in light of the economic, social, political and
other developments around the world, including:



the public policy implications of our business operations;



our governmental and community relations; and



our philanthropic objectives and practices.

In assessing policies and activities, the Committee considers
the interests of our stockholders, among others, and the ethical
principles expected of a socially responsible corporation,
including Client Focus, Respect for the Individual, Teamwork,
Responsible Citizenship and Integrity.

The Audit Committee is comprised of five independent Directors
and operates under a written charter. The Audit Committee held
12 meetings in 2006. The meetings facilitated communication with
senior management and employees, the internal auditors and
Deloitte & Touche LLP (Deloitte & Touche), the
Companys independent registered public accounting firm.
The Audit Committee held discussions with the internal auditors
and Deloitte & Touche, both with and without management
present, on the results of their audits and the overall quality
of the Companys financial reporting and internal controls.

The Audit Committee has the sole authority to appoint or replace
the independent registered public accounting firm and is
directly responsible for the oversight of the scope of its role
and the determination of its compensation. The Audit Committee
regularly evaluated the performance and independence of
Deloitte & Touche and, in addition, reviewed and
pre-approved all services provided by Deloitte &
Touche, the member firms of Deloitte Touche Tohmatsu, and their
respective affiliates (collectively, the Deloitte Entities)
during 2006. The Audit Committee also has considered whether the
provision of non-audit services by the Deloitte Entities is
compatible with maintaining Deloitte & Touches
independence.

As stated in its charter, the Audit Committees role is one
of oversight. It is the responsibility of Merrill Lynchs
management to establish and maintain a system of internal
control over financial reporting, to plan and conduct internal
audits and to prepare consolidated financial statements in
accordance with U.S. generally accepted accounting
principles. It is the responsibility of Merrill Lynchs
independent registered public accounting firm to audit those
financial statements and opine upon the effectiveness of the
internal control over financial reporting as of each fiscal year
end. The Audit Committee does not provide any expert or other
special assurance as to the Companys financial statements
or any expert or professional certification as to the work of
the Companys independent registered public accounting firm.

In fulfilling its responsibilities, the Audit Committee has met
and held discussions with management and Deloitte &
Touche regarding the fair and complete presentation of Merrill
Lynchs financial results. The Audit Committee has
discussed significant accounting policies applied by the Company
in its financial statements, as well as alternative treatments.
The Audit Committee has met to review and discuss the annual
audited and quarterly condensed consolidated financial
statements for Merrill Lynch for the 2006 fiscal year (including
the disclosures contained in the Companys 2006 Annual
Report on
Form 10-K
and its 2006 Quarterly Reports on
Form 10-Q,
under the heading Managements Discussion and
Analysis of Financial Condition and Results of Operations)
with Merrill Lynchs management and Deloitte &
Touche. The Audit Committee also reviewed and discussed with
management, the internal auditors and Deloitte &
Touche, the reports required by Section 404 of the
Sarbanes-Oxley Act of 2002, namely, managements annual
report on the Companys internal control over financial
reporting and Deloitte & Touches associated
attestation reports.

The Audit Committee has discussed with Deloitte &
Touche the matters required to be discussed by professional and
regulatory requirements, including, but not limited to,
Statement of Auditing Standards No. 61, as amended and
adopted by the Public Company Accounting Oversight Board. In
addition, the Audit Committee has received written disclosures
and the letter from Deloitte & Touche as required by
Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as
modified or supplemented, and has discussed with
Deloitte & Touche its independence from the Company and
its management.

In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements for Merrill Lynch
as at and for the fiscal year ended December 29, 2006 be
included in the Companys 2006 Annual Report to
Shareholders and incorporated by reference into the
Companys 2006 Annual Report on
Form 10-K.

Consistent with SEC rules regarding the independence of our
registered public accounting firm, the Audit Committee has
established a policy governing the provision of audit and
non-audit services.

Pursuant to this policy, the Audit Committee annually considers
and, if appropriate, approves the provision of audit services to
the Company by the independent registered public accounting firm
and by any other accounting firm proposed to be retained to
provide audit services (e.g., in compliance with a foreign
statute). The Audit Committee also considers and, if
appropriate, pre-approves the provision of services by the
independent registered public accounting firm that fit within
the following categories of permitted audit, audit-related, tax
and all other services within a specified dollar limit. The
services that may be performed by the independent registered
public accounting firm, with approval of the Audit Committee,
are defined in the policy as follows:



Audit services include audit, review and attest services
necessary in order to complete the audit and quarterly reviews
of our financial statements, as well as services that generally
only the independent registered public accounting firm can
provide, such as comfort letters, statutory audits, consents and
review of documents filed with the SEC.



Audit-Related services are assurance and related services
provided by the independent registered public accounting firm
that are reasonably related to the review of our financial
statements and are not audit services.



Tax services include all services performed by the
independent registered public accounting firms tax
personnel except those services specifically related to the
audit of our financial statements, and include tax compliance,
tax advice and tax planning services.



All Other services are services not captured in the other
three categories that are not prohibited services, as defined by
the SEC, and that the Audit Committee believes will not impair
the independence of the independent registered public accounting
firm.

Any proposed engagement of our independent registered public
accounting firm that does not fit within one of the pre-approved
categories of service or is not within the established fee
limits must be specifically pre-approved by the Audit Committee.

The Audit Committee has delegated pre-approval authority to the
Chair of the Audit Committee in time-sensitive cases. The
exercise of such authority must be reported to the Audit
Committee at its next regularly scheduled meeting. The Audit
Committee regularly reviews summary reports detailing all
services, related fees and expenses provided to us by the
independent registered public accounting firm.

The following table presents aggregate fees billed for audits of
our consolidated financial statements and fees billed for
audit-related and non-audit services rendered by
Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates for the fiscal
years ended December 29, 2006 and December 31, 2005.
In pre-approving 100% of the services generating fees in 2006
and 2005, the Audit Committee has not relied on the de
minimis exception to the SECs pre-approval
requirements applicable to the provision of audit-related, tax
and all other services provided by the independent registered
public accounting firm.

2006

2005

Audit Fees (1)

$

40,300,000

$

38,800,000

Audit-Related Fees (2)

8,500,000

5,700,000

Tax Fees (3)

3,100,000

5,500,000

All Other Fees (4)

-

2,200,000

Total Fees

$

51,900,000

$

52,200,000

(1)

Audit Fees consisted of fees for the audits of the
consolidated financial statements and reviews of the condensed
consolidated financial statements filed with the SEC on
Forms 10-K,10-Q and
8-K as well
as work generally only the independent registered public
accounting firm can be reasonably expected to provide, such as
comfort letters, statutory audits, consents and review of
documents filed with the SEC. Audit fees also included fees for
the audit opinion rendered regarding the effectiveness of
internal control over financial reporting and the audit opinion
related to managements assessment of the effectiveness of
internal control over financial reporting under Section 404
of the Sarbanes-Oxley Act of 2002.

(2)

Audit-Related Fees consisted principally of fees for
employee benefit plan audits, accounting consultations and
attest services relating to financial accounting and reporting
standards, attest services pursuant to Statement of Auditing
Standards No. 70, reports on internal controls of our
processing systems, transaction services such as due diligence
and accounting consultations related to acquisitions, reports in
connection with
agreed-upon
procedures related to subsidiaries that deal in derivatives and
in connection with data verification and
agreed-upon
procedures related to asset securitizations.

(3)

Tax Fees consisted of fees for all services performed by
the independent registered public accounting firms tax
personnel, except those services specifically related to the
audit and review of the financial statements, and consisted
principally of tax compliance (i.e., services rendered based
upon facts already in existence or transactions that have
already occurred to document, compute and obtain government
approval for amounts to be included in tax filings), tax
advisory and tax planning services. Tax compliance related fees
accounted for $2,400,000 of the 2006 tax fees and $3,900,000 of
the 2005 tax fees.

(4)

All Other Fees consisted principally of fees for advisory
and management consulting services supporting improvements in
customer service and customer relationship management and
reporting, as well as project management for developing and
implementing non-financial systems related to managing client
accounts.

We believe that share ownership by Directors, officers and
employees helps to align their interests with the interests of
shareholders. We also believe that this alignment has been an
important factor in the long-term returns we have achieved for
our shareholders.

The following table contains information about the beneficial
ownership of our common stock by each of the Directors, the
Chief Executive Officer and the named executive officers and by
all Directors and named executive officers considered as a
group. In addition, we have provided information about ownership
of stock-linked instruments that provide economic exposure to
our common stock but do not represent actual beneficial
ownership of shares. This information is as of February 28,
2007, the record date.

Amount and Nature
of Beneficial Ownership

Total

Beneficial

Common

Stock

Stock

Name

Position

Ownership (1)

Stock (2)

Options (3)

Units (4)

Armando M. Codina

Director

-

-

-

6,995

Virgis W. Colbert

Director

-

-

-

1,389

Jill K. Conway

Director

27,049

9,377

17,672

13,555

Alberto Cribiore

Director

43,333

35,000

8,333

14,647

Jeffrey N. Edwards

Chief Financial Officer

789,886

455,455

342,703

-

Ahmass L. Fakahany

Executive Vice President

937,197

612,200

338,474

-

John D. Finnegan

Director

3,554

-

3,554

7,215

Gregory J. Fleming

Executive Vice President

912,904

672,809

254,797

-

Dow Kim

Executive Vice President

794,042

794,042

20,828

-

Robert J. McCann

Executive Vice President

1,231,680

587,697

658,685

-

Judith Mayhew Jonas

Director

-

-

-

1,389

David K. Newbigging

Director

34,329

16,657

17,672

14,635

E. Stanley ONeal

Director, Chairman and CEO (5)

3,214,358

1,363,774

1,884,889

-

Aulana L. Peters

Director

4,079

4,079

-

32,005

Joseph W. Prueher

Director

17,601

869

16,732

11,010

Ann N. Reese

Director

6,992

4,480

2,512

6,853

Charles O. Rossotti

Director

7,012

4,500

2,512

9,252

Directors and named executive
officers as a group

8,024,018

4,560,941

3,569,363

118,951

(1)

This column presents the total
shares of common stock that are beneficially owned or can be
acquired within 60 days of the record date. No individual
Director or named executive officer beneficially owns more than
1.0% of our outstanding common stock. The Directors and named
executive officers as a group beneficially own approximately
0.91% of our outstanding common stock. None of our Directors or
named executive officers has pledged any of our common stock as
security.

(2)

Except as noted, the Directors and
named executive officers have sole voting and investment power
over the shares of common stock listed. Of the common stock held
by Mrs. Peters, 3,412 shares are held in a trust for
which she has shared voting and investment power.

(3)

This column includes 3,463,077
stock options held by the Directors and named executive officers
that are exercisable as of the record date or within
60 days of the record date, and are, therefore, also
included in the Total Beneficial Ownership column. The number of
stock options exercisable as of the record date or within
60 days of the record date for the named individuals are as
follows: Mrs. Conway 17,672; Mr. Cribiore 8,333;
Mr. Edwards 334,431; Mr. Fakahany 324,997;
Mr. Finnegan 3,554; Mr. Fleming 240,095; Mr. Kim
0; Mr. McCann 643,983; Mr. Newbigging 17,672;
Mr. ONeal 1,850,584; Admiral Prueher 16,732;
Mrs. Reese 2,512; and Mr. Rossotti 2,512.

(4)

Stock units are linked to the value
of our common stock and generally are paid in shares of common
stock at the end of the applicable restricted or deferral
period. None of the stock units are payable within 60 days
of the record date.

(5)

Mr. ONeal also serves as
the President and Chief Operating Officer of the Company.

As trustee or discretionary
advisor for certain unaffiliated accounts and collective
investment funds

24,259,345

(4)

2.75

%

AXA and certain related
parties, including AXA Financial, Inc.

25, avenue Matignon, 75008 Paris,
France

63,424,123

(5)

7.18

%

(1)

Percentages are calculated based on the common stock and
exchangeable securities outstanding as of February 28, 2007.

(2)

This information was provided by State Street Bank and Trust
Company (State Street). As of December 31, 2006, there were
22,128,541 shares allocated to ESOP participants who have
the right to direct the voting by State Street for those
allocated shares. As of December 31, 2006, there were
412,113 shares beneficially owned by the ESOP but
unallocated to participants. As provided by the terms of the
ESOP, State Street is generally obligated to vote unallocated
shares and any allocated shares for which it has not received
voting instructions in the same proportion as allocated shares
for which it has received voting instructions. As of
February 28, 2007, the record date, there were
21,875,236 shares beneficially owned by the ESOP. Of this
number, 21,662,285 shares were allocated to ESOP
participants and 212,951 shares were unallocated to ESOP
participants.

(3)

This information is as of December 31, 2006 and was
provided by State Street. Under our employee benefit plans,
participants have the right to direct the voting by State Street
of shares of common stock. State Street is generally obligated
to vote shares for which it has not received voting instructions
in the same proportion as shares for which it has received
voting instructions. On the record date, there were
28,190,763 shares beneficially owned by these employee
benefit plans.

(4)

This information is as of December 31, 2006 and was
obtained from a Schedule 13G filed with the SEC on
February 14, 2007 by State Street. State Street has sole
voting power and shared dispositive power over these shares.

(5)

Information concerning the amount and nature of the beneficial
ownership of our common stock is as of December 31, 2006
and was obtained from a Schedule 13G filed with the SEC on
February 13, 2007 by AXA and certain related parties,
including AXA Financial, Inc.

The parent holding companies of AXA Financial, Inc. are:

(i)

AXA, a French financial holding company that owns a majority
interest in AXA Financial, Inc. and that owns other AXA
subsidiaries who may be deemed to be beneficial owners of our
common stock; and

(ii)

a group of three French mutual insurance companies (the
Mutuelles AXA) which, as a group, control AXA.

Each of AXA and the Mutuelles AXA may be deemed to have sole
dispositive power over 63,404,268 shares of our common
stock and shared dispositive power over 19,855 shares.
They also may be deemed to have sole voting power over
40,289,549 shares and shared voting power over
6,686,465 shares.

The Schedule 13G indicates that 60,096,775 shares of
our common stock may be deemed to be beneficially owned by AXA
Financial, Inc. through its subsidiaries as follows:

(i)

AllianceBernstein L.P. may be deemed to have sole dispositive
power over 59,690,972 shares of our common stock and shared
dispositive power over 19,855 shares, in each case,
acquired solely for investment purposes on behalf of client
discretionary investment advisory accounts.
AllianceBernstein L.P. also may be deemed to have sole
voting power over 37,687,495 shares and shared voting power
over 6,684,578 shares; and

(ii)

AXA Equitable Life Insurance Company may be deemed to have sole
dispositive power over 385,948 shares solely for investment
purposes. It also may be deemed to have acquired sole voting
power over 152,450 shares.

The Management Development and Compensation Committee of the
Merrill Lynch Board of Directors (MDCC) is comprised of
five independent Directors and operates under a written charter.
The MDCC held eight meetings in 2006. The MDCC met both with and
without management present and the MDCCs independent
compensation consultant from Towers Perrin attended most of
these meetings, including the private sessions.

In fulfilling its responsibilities, the MDCC reviewed the
section of this Proxy Statement entitled Compensation
Discussion and Analysis (CD&A), as prepared by
management of the Company, with management of the Company and
the MDCCs independent compensation consultant and provided
comments on its content.

Based on the review and discussions described above, the MDCC
recommended to the Board of Directors that the CD&A be
included in the Proxy Statement for the Companys 2007
Annual Meeting of Shareholders.

The securities industry is highly competitive in its pursuit of
business opportunities and also in the recruitment and retention
of top talent. This competition for talent reflects a
fundamental characteristic that distinguishes securities-related
businesses from other financial services activities. These
companies strive to deliver incremental returns for their
shareholders and clients that exceed those of the broader
universe of financial firms - and the quality of
intellectual capital available to them is a key ingredient for
achieving superior returns.

Compensation expense is considered to be the most critical
expense for the securities industry, much in the way
expenditures for plant and equipment or research and development
are critical for other industries. For Merrill Lynch and the
other firms in our Peer Group (as defined below), compensation
expense generally accounts for between 40% and 50% of net
revenues. Compensation expense typically follows the increase or
decrease in net revenues at a firm, reflecting the connection of
incentive-based pay to the overall performance of the company.

Merrill Lynch operates in the most innovative and vibrant
segments of the global financial services industry. Our
employees - our human capital - are central to the
value that Merrill Lynch creates for our clients and
shareholders. This has always been the case, but there are also
several recent factors and trends which increase the importance
of, and demand and competition for, human capital in our
industry.

Components of our
business model, and why human capital is such an important
component

Merrill Lynchs business involves several different, but
related, elements: the creation and delivery of customized
solutions that enable our clients to achieve their financial and
business goals; the management of complex financial risks; and
the deployment of shareholder and client capital with the goal
of achieving superior returns.

The primary ingredients for success in our business are people
and capital. Our employees provide relationships, intellect,
creativity and agility in the identification and execution of
business opportunities - and capital, belonging to our
clients and shareholders, is the raw material of the global
markets in which we operate. Unlike some other industries where
real estate, plant and machinery, or other tangible assets are
more prominent factors of production, in our business it is
primarily financial capital and human capital that create the
value. And it is to the providers of that capital -
clients, shareholders and employees - that the returns from
our business performance accrue.

Decisions regarding the companys aggregate compensation
levels take account of the need to balance returns to the
providers of human and financial capital. Our compensation
structure provides the framework to reward our human
capital - our employees - for their contribution
to our success. The essential nature of their role in value
creation is reflected in the industrys compensation
policies and levels, which tend to be highly incentive-driven
and reflect generally high levels of compensation for many
employees and, in particular, for key executives and producers.
Similarly, return on total capital employed is a key management
focus and the return expectations of our shareholders, though
variable due to the cyclical nature of our industry, tend to be
relatively high. Correspondingly, returns to shareholders in our
industry generally are higher than in many others.

Just as we strive to deliver competitive returns on our
financial capital, our compensation framework must also remain
competitive to retain and develop talented employees to serve
client and shareholder interests. In our industry, employee
talents are relatively easily transferred from one employer to
another, and there is continual competitive activity to recruit
talented individuals with valuable experience.

Although there are some public companies with similar business
models, mainly those within our Peer Group, some of the more
comparable activities are conducted by private companies and
partnerships, including private

Recent trends in
the structure and operating model of the financial industry have
intensified the competition for talented financial
professionals.

The overall demand for experienced financial services
professionals continues to grow as globalization has led to
capital markets expansion and innovation in both developed and
emerging markets. In particular the demand for scarce,
specialist risk management, product development and trading
skills has grown significantly as the importance of capital
deployment in global markets and investment banking activities
has increased. Global capital markets are expanding rapidly in
sophistication, depth and diversity as financial services
innovation is a priority for most developing economies. This
growth in financial markets is a key ingredient in the
successful development of the global economy and has led to
increased demand for financial services professionals with
global experience and capabilities.

New business models provide alternative, entrepreneurial
opportunities for talented financial services professionals.
Examples include the growth in hedge funds (there are now more
than 9,000 hedge funds globally) and the development of
independent financial advisors, both of which have benefited
from technological innovation that has lowered entry costs and
enabled the efficient outsourcing of costly back-office
functions. With the emergence of these new business models,
relationships between individuals are often as important as
relationships between institutions. The range of options for
individuals and select teams is sustaining growth in
compensation levels and providing a new benchmark of
entrepreneurial opportunity, often within private organizations,
against which many employees calibrate their career and
compensation choices.

Technological innovation has also led to reduced margins in
several traditional elements of the financial services business
so that increasingly, the success of our business is tied to
employee-driven innovation in the deployment of capital to
generate incremental returns for clients and shareholders.

The competitive
environment influences the structure, as well as the absolute
level, of compensation for key executives and
producers.

In light of the factors outlined above, Merrill Lynch applies a
compensation framework that emphasizes variable pay, uses
substantial stock-based compensation to support alignment with
stockholders and retention of employees and ensures that
compensation opportunities are competitive in the markets in
which we operate. Merrill Lynch has a long-standing practice of
emphasizing stock as a substantial component of compensation for
its key executives and producers. This practice promotes an
alignment of interests between shareholders and employees and
fosters an ownership culture, which increases employee focus on
returns across the economic and business cycles. Stock-based
compensation also provides a risk/reward profile comparable to
the entrepreneurial opportunities available at private
competitors, in that total rewards are driven in large measure
by the ability to generate superior returns. We believe that our
shareholders are also well served by the use of stock
compensation because of the retention value inherent in the
vesting period.

Compensation
Rationale and Objectives

At the end of 2005, in support of a Board and management review
of our strategic priorities over the next three to five years,
we took a number of steps to increase emphasis on longer-term
performance. As a result, we made several changes in the
compensation structure for key senior executives, including the
named executive officers:



We substantially increased the equity component of total annual
compensation to 60% (one of the highest equity percentages in
our Peer Group) and reduced the cash component accordingly, so
that a higher

percentage of compensation is subject to vesting and potential
forfeiture and dependent on future share prices.



We adopted guidelines requiring executive officers to retain 75%
of the net after-tax value of their equity holdings on an annual
basis.



We invited each executive officer to participate in the Managing
Partner Incentive Program (MPP or MP program), a three-year
performance-based program that is tied to the Companys
annual ROE performance in 2006, 2007 and 2008. Under the MPP, a
portion of annual equity compensation is allocated to this
performance-based program. These amounts may be reduced or
completely forfeited if specified ROE goals are not met, and
there is also upside opportunity if target goals are exceeded.
The MPP created a strong partnership incentive by rewarding top
executives equally for firm-wide team achievements regardless of
individual pay levels. The MPP also has a strong retention
element because it is subject to four-year cliff vesting and
cannot be easily replicated or replaced by our competitors.

The key objectives of our approach to executive compensation are
outlined below:

We Pay for Performance. Our annual incentive
compensation programs emphasize the variable component of
compensation and compensate executives and key employees based
on individual, business unit and Company-wide performance
measured against pre-determined objectives. We believe this
approach drives profitability and competitive advantage for the
Company and for our shareholders. In determining compensation
for our executives, we consider Company performance both on an
absolute basis and relative to our Peer Group. We emphasize
variable pay as the core of our compensation policy to provide a
strong incentive to increase financial performance and enhance
returns to shareholders. In addition, our industry is highly
sensitive to market conditions and this approach enables us to
control costs when revenues decline in down markets and to
increase variable pay when revenues are growing in expanding
markets. We also strive to remain disciplined in our approach to
compensation; although overall compensation expense tends to
increase with revenue growth, we have been able to reduce our
ratio of compensation expense to net revenues for the last four
years even as we repositioned our businesses and took advantage
of opportunities for growth.

Our Compensation Programs Support Retention and Alignment
with Shareholders. We pay a significant portion
of variable annual incentive compensation in the form of annual
restricted share grants that contain restrictive covenants and
vest incrementally over a four-year period. The equity component
of annual compensation helps us retain our executives because it
is subject to forfeiture if an executive leaves the Company
prior to vesting for any reason other than retirement.
Consequently, because a large portion of each executives
annual bonus is not paid in the year it is earned, the cost of
leaving the Company can be significant to both the executive and
the competition. By emphasizing the stock component of annual
pay, we encourage key employees to establish long-term careers
with Merrill Lynch, which helps us recruit our leaders from
inside the Company. Their experience and long-term perspective
benefit us as we grow our businesses and take measured risks in
complex financial markets. Over time, their wealth is
increasingly concentrated in Merrill Lynch stock, which
intensifies their focus on the long-term performance of the
Company and ensures alignment with our shareholders because a
significant portion of their net worth will increase or decrease
with the Companys stock price. In addition, our stock
retention guidelines require executive officers to retain 75% of
the net after-tax value of their equity holdings on an annual
basis, and executive officers are not permitted to hedge their
exposure to Merrill Lynch stock.

We Offer Compensation Opportunities that are Competitive in
Our Industry. We offer compensation opportunities
that are comparable to those of our competitors so that we can
attract, retain and motivate the executive officers and key
employees who are essential to our success. With this in mind,
we remain informed about competitive pay levels and take them
into account as we determine compensation within our
pay-for-performance
philosophy. Our information is based on independently prepared
compensation survey results conducted by compensation
consultants and publicly-reported information for executive
officers and key employees with similar responsibilities and
experience at Peer Group companies. We focus primarily on

aggregated and reported compensation information from The Bear
Stearns Companies Inc., Citigroup Inc., The Goldman Sachs Group,
Inc., J.P. Morgan Chase & Co., Lehman Brothers
Holdings Inc. and Morgan Stanley (collectively, the Peer Group).
The MDCC also uses the financial performance of the Peer Group
to measure our relative performance in making year-end
compensation decisions. We have used this Peer Group for
compensation and performance comparisons for a number of years,
as we believe that these firms have profit margins in key
businesses and a business mix most similar to our own and
compete directly for the same talent pool globally. This Peer
Group also serves as a proxy for our other non-traditional
competitors - such as hedge funds and private equity
funds - who also compete for this talent pool but do not
make compensation information publicly available.

Annual Pay for Executive Officers. The primary
components of our annual pay to our executive officers are
summarized in the following table.

Annual
Pay for

Executive
Officers

Description

Delivery

Comments

Base Salary

Base salary typically represents
less than 3% of total compensation.

100% in cash, paid
bi-weekly.

Executive salaries are based on job
function and are typically reviewed annually.

Annual Incentive Compensation
(Annual Bonus)

Performance-based incentive
compensation that can vary significantly from year to year.

Paid in January for performance in the prior fiscal year.

Delivered in a combination of cash and equity-based grants with 60% of total compensation for executives delivered as equity.

For 2006, the equity portion was 100% restricted stock.

Variable, increasing or decreasing annually, based on individual, business unit and company-wide performance.

Not formulaic; performance based.

Equity Portion of the Annual Bonus. We
pay a significant portion of annual incentive compensation for
executive officers in the form of stock-based compensation.
Under our current programs, 60% of combined salary and annual
bonus for our executive officers is paid in equity. Restricted
stock awards are delivered in lieu of cash bonus compensation
and represent an integral part of the annual incentive
compensation paid for performance in the prior fiscal year. As a
result, restricted stock awards are not subject to further
performance-based vesting requirements. These awards contain
restrictive covenants against post-termination competition, use
of confidential information and solicitation of employees and
remain subject to forfeiture during the vesting period.



Vesting and Retirement
Treatment. Restricted stock awards for
executives vest in 25% increments over the four years following
the year of grant. This is a change from our previous policy of
four-year cliff vesting, in which 100% of the award
vests in the fourth year following the grant. We made this
change for the 2005 performance year for all employees who
participate in our stock plans. At the same time, we introduced
a new definition of retirement in our stock grants to make it
more difficult for employees to retain grants when they leave
the Company, even if they do not join a competitor. Grants made
for the 2006 performance year permit executives and employees to
retain grants upon retirement if, at the time they retire, their
combined age and length of service with the Company equals a
total of at least 60 and they do not join a competitor of
Merrill Lynch or breach any other covenant in the grant during
the vesting period. Under earlier grants, employees

could generally qualify for this treatment if their combined age
and length of service equaled a total of at least 45, subject to
similar non-compete and other covenant restrictions during the
vesting period. As described under the heading Tax
Accounting and Regulatory Factors, changes in accounting
standards in 2006, combined with other business and competitive
considerations, prompted us to undertake a comprehensive review
of our stock-based incentive awards, including vesting schedules
and retirement eligibility requirements, examining their impact
to both the firm and its employees. These changes resulted from
that review.



Conversion. The dollar value of the
portion of annual incentive compensation to be paid as equity
for the executive officers is converted into restricted shares
based on the market price of our stock on the date that the MDCC
approves the grants. In accordance with our written stock grant
guidelines, the grant of year-end stock is made at a regular
MDCC meeting in January following our release of annual earnings.

Deferred Compensation. We offer certain
highly paid employees the ability to defer receipt of up to 90%
of their annual cash incentive payments or commission
compensation. We do not match deferred amounts. All of the
executive officers listed in the Summary Compensation Table were
eligible to defer compensation in 2006, although none of them
elected to do so. We believe that this program is important to
provide our senior employees with flexibility in meeting their
future income needs. The deferred compensation program is
described in more detail in the Non-Qualified Deferred
Compensation Table and related narrative disclosure.

Long-Term Performance-Based Awards - Managing Partner
Incentive Program (MPP). The details of the MPP are
described in more detail below.

Program

Description

Delivery

Comments

Managing Partner Incentive
Program

New performance-based program implemented in January 2006 creates partnership emphasis by rewarding key senior executives on an equal basis around specific firm- wide goals and initiatives regardless of individual pay levels.

Three-year plan to create incentive around and reward ROE improvement in 2006 through 2008.

For executive officers and select members of senior management.

Individual and Company both contribute to the program.

1/3 of the awards are converted to restricted stock each year based on achievement of ROE results for the immediately preceding year.

Converted restricted shares vest in January of 2010.

Target ROE levels were determined at the close of 2005 and were set to exceed 2005 actual ROE by increasing increments for each year of the program.

If annual ROE performs at target level, MP units will be converted at a 1 to1 ratio.

If annual ROE underperforms target, MP units will be converted at a ratio less than 1 to 1 or forfeited completely for
failure to achieve a minimum ROE threshold.

If annual ROE outperforms target, MP units will be converted at a ratio in excess of 1 to 1 up to a maximum ratio of 2.5 to 1 for significant outperformance.

In addition, for the CEO and Executive Vice Presidents, failure to achieve at least 2005 baseline ROE for any performance year results in complete forfeiture of the company match for that year.

Link to longer term financial results with increased focus on
firm-wide performance. At the
beginning of 2006, we granted MP participation units (MP units)
representing three years participation in the MPP. The
specific goal for the first performance-based program under the
MPP is to increase our annual return on equity (ROE) for our
2006, 2007 and 2008 fiscal years over ROE for 2005.



Individual and Company
Contributions. Participants and Merrill Lynch
each contribute to the MPP. For the CEO and other executive
officers (other than the CFO), the dollar amount of the equity
portion of their annual bonus for each of 2005, 2006, and 2007
is reduced by $2 million, representing the executives
individual contributions. The Company match is $.75 for each
dollar contributed. For the CFO and other select members of
senior management, the individual contribution is $666,667 for
each of 2005, 2006 and 2007, and the Company match is $2.50 for
each dollar contributed.

Conversion Ratios. After the end of
each year in the period from 2006 through 2008, one-third of the
total MP units are eligible for conversion into restricted
shares based on pre-determined annual ROE hurdles. Despite
conversion each year, shares are restricted and do not vest or
release, and are subject to forfeiture upon termination of
employment, until 2010. Target ROE levels were determined at the
close of 2005 and were set so that the 2006 target would exceed
2005 actual ROE by a specified margin, and 2007 and 2008 targets
would exceed the prior year target by additional increments. The
minimum and maximum hurdles increase each year as well,
consistent with the new annual targets. If our annual ROE is at
or above the target ROE for the year, the conversion ratio is 1
to 1 or better and increases with incremental ROE improvement to
a maximum ratio of 2.5 to 1 for significant out-performance,
whereas ROE below this target will result in a conversion ratio
of less than 1 to 1, declining with incremental
underperformance and resulting in the complete forfeiture of the
MP units for failure to achieve a minimum ROE threshold. In
addition, for the named executive officers other than the CFO,
failure to achieve at least 2005 baseline ROE for any
performance year results in the complete forfeiture of the
Company match for that year.



MP Units. MP units pay dividend
equivalents quarterly, equal to dividends payable on Merrill
Lynch common stock, prior to their conversion to restricted
shares based on ROE performance as described above. One-third of
the awards are converted to restricted stock or forfeited each
year based on achievement of ROE results for the immediately
preceding year. Converted restricted shares will vest in January
2010 and remain subject to forfeiture until that date. Under the
MPP, retirement-eligible executives who leave the Company retain
restricted shares that have already converted, subject to
compliance with the covenants in the grants for the remaining
vesting period, but MP units that have not converted do not get
retirement treatment and are forfeited.



2006 ROE. The MDCC retains discretion,
in consultation with management, to make appropriate adjustments
to the determination of ROE to emphasize operating performance.
For the 2006 performance year, the MDCC reviewed the impact on
ROE of two non-recurring items - the one-time net gain
arising from the closing of the merger of Merrill Lynch
Investment Managers (MLIM), our asset management business, with
BlackRock, Inc. (Black Rock) and the one-time non-cash
compensation costs recorded in the first quarter of 2006 in
connection with our adoption of FAS 123R. The MDCC
concluded that while the impact of these two events essentially
offset each other from a financial point of view, it was
appropriate to adjust GAAP ROE to eliminate the effect of
both these events to reflect operating performance. This
adjustment did not affect the ratio at which the MP units
converted in early 2007.

Based on operating ROE performance in 2006, which exceeded 2005
ROE by 5.6 percentage points, the 2006 target level was
exceeded and one-third of the MP units converted at the plan
maximum ratio of 2.5 to 1 in January 2007. Within the
partnership plan and concept, this performance resulted in the
delivery of an equal award of 121,363 restricted shares to each
of Mr. ONeal, Mr. Kim, Mr. Fleming,
Mr. Fakahany and Mr. McCann and 84,663 restricted
shares to Mr. Edwards and other select members of senior
management. All such restricted shares are subject to vesting
requirements until January 2010, and their value at vesting will
depend on our stock price at that time.

The Companys future ROE performance is inherently
uncertain and can be significantly affected by market
conditions, tax rates, asset turnover and other factors.
Assuming market conditions in 2007 and 2008 continue to be as
favorable as those in 2006, and assuming the Company continues
to successfully execute on its operating plan, it is likely that
target ROE will be met or exceeded and possible that the plan
will pay out at or near the maximum level in each year.



Future Performance-Based
Programs. Management and the MDCC are
continuing to explore approaches to providing incentives for
long-term objectives through performance-based programs to
follow the first MPP.

Employee contributions for health
and dental are higher for more highly compensated employees.

Employment Agreements. We do not have any
employment agreements with our executive officers or any
agreements to provide severance protection to any executive
officer absent a change in control of the Company. Accordingly,
if the CEO or any executive officer terminates his or her
employment for any reason and there has not been a change in
control of the Company, any severance payments or other benefits
would be at the discretion of the MDCC.

Restrictive Covenant Agreements. We have
entered into Restrictive Covenant Agreements with all of our
executive officers and select members of senior management.
These agreements require six months notice to the Company prior
to termination and limit the ability of executive officers to
compete with us or to solicit or hire our employees if they
leave the Company.

Change in Control Severance Agreements. We
have agreements with seven executive officers that provide for
severance payments in certain circumstances after a change in
control. Under these double-trigger agreements, we
will be required to make severance payments if: (1) there
is a change in control and(2) the executive
officer is terminated other than for cause or
resigns for good reason. In 2005, we re-examined the

need for these agreements and eliminated them for 26 other
members of our senior management. We continue to believe that,
for our executive officers, these agreements provide desirable
incentives for them to remain with us through any period of
transition and uncertainty in connection with a change in
control. Separately, under our equity plans, all participants,
including our executive officers, will receive cash payments for
their stock if, following a change in control, they are
terminated other than for cause or resign for
good reason. For a description of these agreements
see Potential Payments Upon Termination or Change in
Control in this Proxy Statement.

Tax, Accounting
and Regulatory Factors

Adoption of FAS 123R. In the first
quarter of 2006, we adopted the provisions of the Financial
Accounting Standards Boards Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based
Payment, a revision of FAS No. 123
(FAS 123R). Previously, we had recognized expense for
stock-based compensation over the vesting period stipulated in
the grant for all employees, including those who had satisfied
retirement eligibility criteria but remained subject to a
restriction on competition that applied from the date of
retirement through the end of each applicable vesting period.
When we adopted FAS 123R, we were required to immediately
recognize 100% of the expense related to grants of stock-based
compensation for the 2005 performance year to
retirement-eligible employees, including Mr. ONeal,
Mr. Edwards, Mr. Fakahany and Mr. McCann. In
addition, we began accruing the expense of stock-based
compensation for retirement-eligible employees over the 2006
performance year. In other words, in 2006, we accrued the
expected value of stock-based compensation for stock grants to
be made in January 2007 to retirement-eligible employees,
including Mr. ONeal, Mr. Edwards,
Mr. Fakahany and Mr. McCann. We are not permitted,
however, to accrue a similar expense for employees who are not
retirement-eligible, including Mr. Kim and
Mr. Fleming. Expense for stock grants to those employees is
recognized over the vesting period.

The adoption of FAS 123R, combined with other business and
competitive considerations, prompted us to undertake a
comprehensive review of our stock-based incentive
awards  including vesting schedules and retirement
eligibility requirements  and their impact on the
firm and its employees. Upon the completion of this review, the
MDCC determined that, to increase retention of high quality
personnel, future stock grants should contain more stringent age
and length of service requirements for employees to be eligible
to retire from Merrill Lynch while their stock grants continue
to vest, subject to compliance with the strict non-compete
provisions. To facilitate the transition to the more stringent
future requirements, the terms of most outstanding stock awards
previously granted to our employees, including Mr. Kim and
Mr. Fleming, were modified, effective March 31, 2006,
to permit them to be immediately eligible for retirement with
respect to those earlier awards. Although we modified the
retirement-related provisions of the previous stock awards, the
vesting and non-compete provisions otherwise remain in force. We
recorded one-time compensation expense in the first quarter of
2006 relating to this modification.

As required by transition guidance relating to FAS 123R,
compensation expenses for stock grants made prior to 2006 to
employees who had been retirement-eligible prior to 2006
continue to be recognized over the applicable vesting periods.
All of the named executive officers were retirement-eligible
with respect to some pre-2006 grants, so we recorded
compensation expense with respect to a portion of such earlier
grants in 2006.

Impact of Accounting Treatment on Disclosure of Stock-Based
Compensation. As a result of the adoption of
FAS 123R and the modifications to retirement eligibility
described above, the Summary Compensation Table includes the
expense for multiple performance years. Under SEC rules adopted
in December 2006, we are now required to include, in the
Stock Awards and Option Awards columns
of the Summary Compensation Table, all amounts recognized in our
2006 financial statements with respect to outstanding
stock-based awards. These amounts are also included in the
Total column in the Summary Compensation Table. For
executive officers eligible for retirement under the terms of
awards for the 2006 performance year, including
Mr. ONeal, Mr. Edwards, Mr. Fakahany and
Mr. McCann, we recognized expense in 2006 for the
following: (1) the full value of the stock award for the
2006 performance year; (2) the full value of the stock
award granted for the 2005

performance year; and (3) portions of awards for
performance years prior to 2005. For Mr. Kim and
Mr. Fleming, who are not career retirement eligible for
awards for the 2006 performance year, we did not accrue any
expense in 2006 for the awards for the 2006 performance year but
recognized the full value of the award for the 2005 performance
year and portions of awards for prior performance years. With
the exception of amounts accrued for grants made for the 2006
performance year, all of these amounts already were disclosed as
compensation for the relevant performance year in past proxy
statements (for those executives required to be included in
those proxy statements). See Summary Compensation
Table, footnote 2, in this Proxy Statement.

Internal Revenue Code Section 162(m). We
try to maximize the amount of compensation that is deductible
for tax purposes under Section 162(m) of the Internal
Revenue Code and related regulations. We use a
shareholder-approved formula to determine the maximum amount of
cash bonuses and restricted stock that we are able to pay to any
of our executives. Amounts paid under this formula qualify as
deductible compensation expense under Internal Revenue Code
Section 162(m). This formula imposes a limit of 1% of our
pre-tax profit on amounts paid to each executive. Under the
formula, the MDCC has negative discretion to pay
amounts that are less than, but not more than, the formula
amounts. Options are considered to be performance-based
compensation under Section 162(m) and are not subject to
the limit. Each year, the MDCC, after a presentation from the
Chief Financial Officer, certifies that the compensation to be
awarded for the prior fiscal year complies with the performance
goal formula approved by shareholders. In practice, the formula
operates as a cap on annual incentive compensation paid in cash
or restricted stock, and the MDCC generally exercises negative
discretion to pay amounts that are significantly lower than the
formula amounts. The formula yielded a maximum of
$104.2 million for 2006.

Determination of
Annual Compensation

In accordance with its Board-approved charter, the MDCC
developed its 2006 annual compensation determinations with two
primary objectives in mind - to reward tangible
results measured against pre-established performance objectives
and to ensure that compensation for our executives is
competitive within our industry. As described in Corporate
Governance - Board Committees - The
Management Development and Compensation
Committee - Setting Annual Performance
Objectives in this Proxy Statement, at the beginning of
the year, management, in a dialogue with the MDCC, set a series
of specified financial, strategic and leadership goals for the
Company and individual business units. These objectives were
shared with the full Board after formal approval by the MDCC.
Over the course of the year, management provided the MDCC with
regular updates on the progress of performance against these
objectives.

At meetings in December 2006 and January 2007, the MDCC reviewed
the 2006 results for the Company, compared those results with
reported results in the Peer Group, and conducted a final review
of CEO performance against financial and strategic objectives
for 2006. Separately, the CEO provided the Committee with a
detailed review of the performance of each Executive Vice
President and the CFO and made a 2006 total compensation
recommendation for each of them. Finally, the Committee
considered information on Peer Group total compensation levels,
developed by management and Towers Perrin from independent
survey data and public filings. On the basis of this
information, the MDCC made its 2006 annual pay decisions at a
private session on January 10, 2007, as more fully
described below.

Financial
Review

The Committee evaluated preliminary final 2006 financial results
on a GAAP and operating basis (excluding the one-time net gain
arising from the closing of the merger between MLIM and
BlackRock in the third quarter and the one-time non-cash
compensation costs recorded in the first quarter related to the
adoption of FAS 123R). The Committee focused in particular
on growth in net revenues, after-tax earnings, earnings per
share and ROE. The Committee noted that, on an operating basis,
our ratio of compensation to Net Revenues declined by
1.6 percentage points year over year, so that earnings grew
at a faster rate than our compensation pools (a

26% increase in Net Revenues drove a 49% increase in Earnings
Per Share (EPS)). The Committee also took note of the nearly 38%
total shareholder return for the year.

The Committee also considered our results in light of Peer Group
performance and concluded that our 2006 results placed us near
the top of the Peer Group based on these measures. The Committee
noted that the growth trajectory for Revenue, After-Tax
Earnings, EPS and ROE trended sharply upward this year in
comparison to most of the Peer Group, and that this improvement
was impacted significantly by strong results in many of the key
growth areas first identified by management in early 2004 and
vigorously pursued over the past two years.

Performance
Against Objectives

The Committee considered performance against the CEO objectives
determined at the beginning of the year and noted that all
financial targets were met or exceeded and all strategic and
leadership objectives were met with distinction. This review
included consideration of numerous objectives but focused in
particular on the following achievements:

Financial
Objectives



Year over year Net Revenues increased by 26% to
$32.7 billion (on an operating basis), significantly
exceeding targeted growth;



Pre-tax earnings growth of 44% (on an operating basis), a growth
rate near the top of the Peer Group, with a
year-over-year
improvement in the Companys share of overall Peer Group
Pre-Tax Profit; and



Return on Equity of 21.6% (on an operating basis) for
2006 - an increase of 5.6 percentage points,
nearly twice the Peer Group median increase.

In its discussion of ROE performance, the MDCC focused on the
importance of this measure, which had been identified as a high
priority for the CEO and the members of executive management.
They noted that the improvement had been driven substantially by
the achievement of record earnings of $7.6 billion (on an
operating basis), which represented a 48% increase over the
previous years record. The Committee also noted that these
record results reflected solid execution around several specific
growth imperatives outlined to the Board over the past three
years.

Successfully repositioned the asset management business for
strategic growth; executed the merger of MLIM with
BlackRock, retaining a 49.8% stake in the new BlackRock and
positioning the business for future growth with a new business
model;



Enhanced oversight of the balance sheet by the Finance Committee
of the Board;



Implemented a new capital management framework and increased
balance sheet efficiency and discipline; and



Strengthened the Merrill Lynch brand in the European region with
broad business growth.

Continued commitment to leadership development and a
performance-based company culture, including rolling out our
leadership model to the next level of the organization;



Successfully restructured leadership within GMI and the Pacific
Rim, with minimal disruption;



Added top talent across the firm in specialized areas; and



Achieved measurable progress on diversity
goals - leading to increased external recognition of
Merrill Lynch as a preferred employer for diverse candidates.

Executive Officer
Review

As mentioned above, the CEO reviewed with Committee members the
achievements of the individual members of executive management.
For the heads of individual business units such as GMI and GWM,
this review focused on the relative contribution of each of
those business units to our overall 2006 results that are
discussed above. The review also detailed each executives
contribution to Company-wide performance and the leadership of
the Company detailed above, as well as each executives
individual leadership achievements. In determining compensation
for the Executive Vice Presidents and the CFO, the Committee
evaluated the CEOs recommendations and differentiated
compensation amounts based on contributions of each individual,
his or her role in the organization, the contribution of his or
her business unit or area, and competitive pay data discussed
below.

Use of
Competitive Data

The MDCC then reviewed 2005 actual and 2006 projected total
compensation amounts for Chief Executive Officers and other
members of executive management in the Peer Group for comparison
purposes and to refine its analysis. The Committee uses this
information as one reference point to ensure that compensation
opportunities are comparable with those in the Peer Group.

2006 Compensation
Determinations

Following consideration in private session of the factors
mentioned above, the Committee determined 2006 compensation for
the CEO, the CFO and the four other most highly compensated
executive officers as specified in the 2006 Annual Executive
Compensation table set forth below. In each case, the annual
incentive compensation was separated into cash and stock
components so that the stock portion would represent 60% of
total annual compensation (before deduction of the individual
MPP contributions). The stock portion of each executives
annual incentive compensation was delivered 100% in restricted
stock except that the specified amount of the stock bonus amount
was retained by the Company as the executives individual
contribution to the partial funding of his three-year
participation in the MPP, payment of which, as described
earlier, is contingent on ROE performance in 2006, 2007 and 2008.

The number of restricted shares granted as the stock portion of
annual incentive compensation was related directly to the dollar
value of the award and was converted based on a market valuation
with no discount. The number of restricted shares granted was
calculated by dividing the dollar amount of the award by
$95.825, the fair market value (the average of the high and low)
of a share of Merrill Lynch common stock on January 22,
2007, the grant date.

The following table sets forth the annual compensation approved
by the MDCC for performance in fiscal year 2006, based on the
methodology described above.

2006 ANNUAL
EXECUTIVE COMPENSATION

Managing

Partner

Incentive

Executive

Salary

Cash
Bonus

Stock
Grant

Program (1)

Total

E. Stanley ONeal

$

700,000

$

18,500,000

$

26,800,000

$

2,000,000

$

48,000,000

Jeffrey N. Edwards

270,833

5,625,000

8,183,333

666,667

14,745,833

Dow Kim

350,000

14,450,000

20,200,000

2,000,000

37,000,000

Gregory J. Fleming

350,000

13,250,000

18,400,000

2,000,000

34,000,000

Ahmass L. Fakahany

350,000

11,650,000

16,000,000

2,000,000

30,000,000

Robert J. McCann

350,000

8,850,000

11,800,000

2,000,000

23,000,000

(1)

Represents the portion of the
executives 2006 stock bonus retained by the Company as a
contribution to three-year participation in the MPP.

The stock grant amounts shown above represent the dollar
value of the portion of 2006 annual incentive compensation
delivered as restricted stock. These amounts are different from
the amounts included in the Summary Compensation Table under
Stock Awards, which are calculated as required by
the SEC disclosure rules and represent expense related to awards
for multiple performance years (including the expense for the
full fair value of awards for two performance years for
Mr. ONeal, Mr. Edwards, Mr. Fakahany and
Mr. McCann). See the disclosure in Tax, Accounting
and Regulatory Factors and the Summary Compensation
Table, footnote 2, in this Proxy Statement for more
information.

These annual cash bonus amounts
were paid in January 2007 for performance in 2006. We also
accrued these amounts for financial reporting purposes in 2006.

(2)

As required by SEC rules adopted in
December 2006, this column includes amounts recognized as an
expense in our 2006 financial statements related to all stock
awards. Specifically, this column includes: (i) the full
grant date fair value of restricted stock granted in 2006 for
performance in 2005; (ii) the full grant date fair value of
2007 awards for performance in 2006 for retirement-eligible
employees (Messrs. ONeal, Edwards, Fakahany and
McCann); (iii) expense related to awards made prior to 2006
to retirement-eligible employees, which continue to be expensed
over the service period; and (iv) expense related to MPP
awards. This column does not include any amount related to 2007
awards for performance in 2006 for Messrs. Kim and Fleming,
who are not retirement-eligible. Because the amounts in this
column were materially affected by accounting factors, you
should refer to Compensation Discussion and
Analysis  Tax, Accounting and Regulatory
Factors in this Proxy Statement and the following table.
You should also consider the 2006 Annual Executive Compensation
Table on the previous page.

The following table details
amounts recognized as an expense relating to stock awards in our
2006 financial statements. Restricted stock awards granted in
2003 to 2006 were previously disclosed as compensation in past
proxy statements for those of our current named executive
officers who were named executive officers in those proxy
statements. New SEC rules require us to disclose these amounts
again now because they were expensed in 2006. These amounts are
also included in the Total column above.

Stock Award Grant
Year

Name

2003 (a)

2004 (b)

2005 (b)

2006 (b)

2007 (c)

Total

Mr. ONeal

$

1,201,451

$

2,777,728

$

7,853,251

$

28,147,621

$

26,800,049

$

66,780,100

Mr. Edwards

408,337

660,116

960,691

11,761,969

8,183,359

21,974,472

Mr. Kim

691,032

1,686,468

2,759,926

19,446,757

-

24,584,183

Mr. Fleming

353,374

1,190,446

2,132,671

15,849,700

-

19,526,191

Mr. Fakahany

588,951

1,091,245

1,881,778

18,628,870

16,000,092

38,190,936

Mr. McCann

-

1,190,446

1,881,778

16,844,051

11,800,082

31,716,357

(a)

The amount for Mr. ONeal
was reflected in full in our 2003 proxy statement under the
Restricted Securities column in the Summary
Compensation Table. The other executives were not required to be
included in the Summary Compensation Table in that year.

(b)

For all executives other than
Mr. Edwards, (i) amounts relating to restricted stock
awards were reflected in full in our 2004, 2005 and 2006 proxy
statements, respectively, under the Restricted
Securities column in the Summary Compensation Table, and
(ii) MP Units granted at the beginning of 2006 were
described in the 2006 proxy statement. Mr. Edwards
compensation was not required to be disclosed in the Summary
Compensation Table in those years. Mr. ONeals
annual incentive bonus paid in 2005 for 2004 performance was
delivered entirely in restricted stock.

(c)

Our 2006 consolidated financial
statements include accrued expense for the estimated value of
2007 stock awards to all retirement-eligible employees for 2006
performance. For purposes of these tables, we have included the
FAS 123R grant date fair value of the actual grants awarded
to retirement-eligible named executive officers.

Restricted shares convey to the
holder the rights of a shareholder, including the right to vote
and receive dividends, but are subject to forfeiture and may not
be sold or transferred during the applicable vesting period.
Restricted shares granted for 2006 vest in four annual
installments of 25% on January 31 in the years 2008 to 2011.
Please see footnote 14 to the consolidated financial
statements included in our 2006 Annual Report for an explanation
of the assumptions used in the FAS 123R valuation.

(3)

The following table details amounts
recognized as expense relating to stock option awards in our
2006 financial statements. We have not granted any options as
compensation for executive officers since January 2004 for
performance in 2003. These amounts relate to grants of
options that were previously disclosed as compensation in past
proxy statements for those of our current named executive
officers who were named executive officers in those proxy
statements. New SEC rules require us to disclose these amounts
this year because they have been recognized as expense for
financial reporting purposes in 2006. These amounts are also
included in the Total column.

Stock Option
Grant Year

Name

2001 (a)

2003 (b)

2004 (b)

Total

Mr. ONeal

$

1,787,893

$

580,309

$

702,329

$

3,070,531

Mr. Edwards

-

197,225

169,352

366,577

Mr. Kim

-

333,767

426,415

760,182

Mr. Fleming

-

170,683

300,998

471,682

Mr. Fakahany

-

284,464

275,914

560,378

Mr. McCann

-

212,400

300,998

513,398

(a)

The amount shown for
Mr. ONeal in 2001 reflects the recognition in 2006 of
the last 20% of the expense of an option grant he received in
connection with his appointment in 2001 as President and Chief
Operating Officer of Merrill Lynch. These options were reflected
in full in our 2002 proxy statement under the Securities
Underlying Options column in the Summary Compensation
Table and the value of these grants was reflected in the
Stock Option Grants Made in Last Fiscal Year table.

(b)

For all of the executives except
Mr. Edwards, these options were reflected in full in our
2004 and 2005 proxy statements, respectively, under the
Securities Underlying Options column in the Summary
Compensation Table and the value of these grants was reflected
in the Stock Option Grants Made in Last Fiscal Year
table. Mr. Edwards compensation was not required to
be disclosed in the Summary Compensation Table in those years.

Please see footnote 14 to the
consolidated financial statements included in our 2006 Annual
Report for an explanation of the assumptions used in the
FAS 123R valuation.

(4)

This column shows the increase in
the value of deferred compensation accounts benchmarked to
private equity funds under Merrill Lynchs voluntary
deferred compensation plans of $717,030 for
Mr. ONeal, $60,759 for Mr. Kim, $165,375 for
Mr. Fleming and $955,489 for Mr. McCann. The amounts
shown reflect the increase, if any, in the value of the
executives accounts at December 29, 2006 over the
value of the executives accounts at December 30, 2005
and include any distributions made during the 2006 fiscal year.
The amounts are benchmarked to private equity funds that
experienced rates of return based on the performance of their
underlying investments in 2006. We have provided notional
leverage (up to 200% of the participants investment) with
respect to these investments and hold the investments directly
to hedge our promise to pay the return. For details of this
program, see the Non-Qualified Deferred Compensation
table in this Proxy Statement.

(5)

For Mr. ONeal this
column also includes $1,232,281, which is the increase from
September 30, 2005 to September 30, 2006 in the
actuarially determined present value of the future annuity
payments due to Mr. ONeal at retirement under the
terms of his Executive Annuity Agreement described below. The
assumptions used in determining the present value of these
future payments under the Executive Annuity Agreement are as
follows: (a) the present value of the accrued benefit as of
September 30, 2005 is based on a discount rate of 5.25%;
(b) the present value of the accrued benefit as of
September 30, 2006 is based on a discount rate of 5.50%;
(c) both values use assumed life expectancy based on
RP-2000 mortality tables with white collar adjustment projected
to 2012; (d) both values assume the annuity is paid as a
100% joint and survivor annuity commencing at age 55; and
(e) both values reflect an offset of
Mr. ONeals assumed social security benefit and
retirement and annuity payments under Merrill Lynch retirement
plans as required under the Executive Annuity Agreement. These
assumptions are the same as those used in footnote 13 to
the consolidated financial statements included in our 2006
Annual Report except that, as required by SEC rules, we assumed
a retirement age of 55 rather than 65 and there is no assumption
for mortality or other termination of employment before his
assumed retirement date.

In 1988, we terminated our
broad-based defined benefit plan. In order to pay vested
benefits, we purchased a group annuity contract under which
certain named executive officers have balances. For
Mr. ONeal, the value of this benefit increased by
$144 in 2006, which is included in the column. The value of this
benefit decreased in 2006 by $44, $56, and $1,134 for
Messrs. Edwards, Fakahany, and McCann, respectively. The
amounts shown are changes in present values of accrued benefits
from September 30, 2005 to September 30, 2006 assuming
different probabilities of optional forms of payment (10% as a
single life annuity, 45% as a 50% joint and survivor annuity and
45% as a 100% joint and survivor annuity), payment commencement
at age 65 and life expectancy based on RP-2000 mortality
tables with white collar adjustment projected to 2018. These
amounts also assume a discount rate of 5.25% as of
September 30, 2005 and 5.50% as of September 30, 2006.
These assumptions are the same as those used in footnote 13
to the consolidated financial statements included in our 2006
Annual Report except that, as required by the SEC, there is no
assumption for mortality or other termination of employment
before assumed retirement.

(6)

The All Other Compensation column
includes: (a) perquisites and other personal benefits;
(b) life insurance premiums paid by the Company; and
(c) contributions made by the Company under our 401(k)
Savings and Investment Plan and our broad-based defined
contribution retirement plan as detailed below:

(a)

We provide cars and trained
security drivers to the CEO and his family and other executive
officers, with the exception of Mr. Edwards. We require the
CEO to use Company-provided aircraft for all air travel. We also
permit members of senior management to use our aircraft for
personal travel when they are not needed for business purposes.
We provide these benefits for personal security, consistent with
a study conducted by a third-party security consultant, and to
maximize use of our executives time. The MDCC has reviewed
these perquisites and believes that they are consistent with
industry practice and that these security and efficiency
objectives justify the associated costs.

The cars are used for commuting as
well as for business and personal travel. The costs associated
with the cars are reimbursed by the executives in an amount
determined under Internal Revenue Service guidelines. Amounts in
the table represent the cost, if any, of providing the cars net
of this reimbursement and the portion of the drivers time
allocable to personal use, which we have determined is
approximately 25% for the executives drivers and 100% for
the driver assigned to the CEOs family.

In calculating the incremental cost
of the use of Company aircraft the following expenses are
included:

We have long-term contracts for use
of fractional aircraft, primarily for business travel. When the
use of fractional aircraft is more economical or efficient, the
Company may supply fractional aircraft for personal use instead
of using Company aircraft. In those cases, the incremental cost
is the contracted
per-hour
fractional cost, plus any fuel surcharges, additional catering
or landing fees, taxes and segment fees.

The incremental cost to Merrill
Lynch in 2006 for perquisites and personal benefits for named
executive officers shown in the column include the following
amounts for company-provided car service: (i) $212,505 for
Mr. ONeal; (ii) $37,968 for Mr. Kim;
(iii) $36,769 for Mr. Fleming; (iv) $42,626 for
Mr. Fakahany; and (v) $38,065 for Mr. McCann; and
the following amounts for aircraft use: (i) $149,133 for
Mr. ONeal; (ii) $1,059 for Mr. Edwards;
(iii) $15,775 for Mr. Kim; (iv) $71,646 for
Mr. Fleming; (v) $46,548 for Mr. Fakahany; and
(vi) $101,892 for Mr. McCann.

(b)

Annual premiums totaling $660 for
each of Messrs. ONeal, McCann, Kim, Fleming, Fakahany
and Edwards for term life insurance policies provided to all
employees.

(c)

Contributions to the 401(k) are
capped at $2,000 for employees with more than $300,000 of
eligible cash compensation, as defined by the Plan.
Contributions to our broad-based defined contribution plan are
based on length of service with the Company as well as
compensation levels. Annual contributions made by the Company
under our 401(k) Savings and Investment Plan (401(k) Plan) in
2006 were $2,000 for each of the named executive officers

and annual contributions to our
broad-based defined contribution retirement plan in 2006 were:
(i) $11,000 for each of Messrs. ONeal, Edwards
and Fakahany; (ii) $8,800 for each of Messrs. Kim and
Fleming; and (iii) $13,200 for Mr. McCann.

Because the FAS 123R value of
Merrill Lynchs restricted shares and MP units is based on
the fair market value of Merrill Lynchs common stock,
which includes an expectation of a future stream of dividends,
amounts paid as dividends or dividend equivalents on outstanding
equity awards are not included in the All Other
Compensation column.

GRANTS OF
PLAN-BASED AWARDS

Restricted
Stock;

Grant Date
Fair

Number of Shares
of

Value of
Restricted

Name

Grant
Date (1)

Stock (1)(2)

Stock (3)

E. Stanley ONeal

1/22/07

279,677

$

26,800,049

Jeffrey N. Edwards

1/22/07

85,399

8,183,359

Dow Kim

1/22/07

210,801

20,200,006

Gregory J. Fleming

1/22/07

192,017

18,400,029

Ahmass L. Fakahany

1/22/07

166,972

16,000,092

Robert J. McCann

1/22/07

123,142

11,800,082

(1)

Merrill Lynch delivers its annual
stock grants in January for performance in the preceding fiscal
year; therefore, this column reflects the restricted stock
awards granted in January 2007 for performance in 2006. In
January 2006, we granted stock awards for performance in 2005
and MP units relating to the full three-year participation in
the MPP. Those awards are reflected in full in the
Outstanding Equity Awards at Fiscal Year-End table
in this Proxy Statement.

The grants in the table were made
under the Merrill Lynch & Co., Inc. Long-Term Incentive
Compensation Plan and the material terms of the grants are
described under Compensation Discussion and
Analysis - Equity Portion of the Annual Bonus in this
Proxy Statement. The number of restricted shares set forth above
was obtained by dividing the dollar amount of the award by
$95.825, the fair market value (average of the high and low) of
a share of Merrill Lynch common stock on January 22, 2007,
the grant date.

(2)

These awards were made entirely in
restricted shares of Merrill Lynchs common stock.
Restricted shares convey all the rights of a shareholder,
including the right to vote and receive dividends, but are
subject to forfeiture upon termination of employment and may not
be sold or transferred during the vesting period. These
restricted shares vest in four annual installments of 25% on
January 31 in the years 2008 to 2011.

(3)

The amounts shown in this column
represent the fair value in accordance with FAS 123R of the
annual grants for 2006 performance as of the grant date
(January 22, 2007). See footnote 14 to the
consolidated financial statements included in our 2006 Annual
Report for an explanation of the methodology and assumptions
used in the FAS 123R valuation. For each executive in the
table the value of the awards shown above plus the amounts shown
in the Bonus column of the Summary
Compensation Table are less than the amount yielded by the
shareholder-approved formula discussed under the heading
Compensation Discussion and Analysis - Tax,
Accounting and Regulatory Factors - Internal Revenue Code
Section 162(m), in this Proxy Statement.

All options were granted as part of
annual incentive compensation at regular meetings of the MDCC in
January following the announcement of our earnings for the prior
fiscal year, except for the grant made to Mr. ONeal
at a meeting of the MDCC on September 24, 2001, expiring on
September 24, 2011, which was made following
Mr. ONeals appointment as President and Chief
Operating Officer. In each case, the exercise price was equal to
the average of the high and low prices of a share of our common
stock on the date of grant. In addition, the grants in the table
above became exercisable and, where applicable, vested, as shown
in the following table:

Options
Expiring

Grant
Date

Vesting and
Exercise Schedule

1/25/2009

1/25/1999

No vesting requirements; options
exercisable as follows: 20% after one year; 40% after two years,
60% after three years; 80% after four years; and 100% after five
years

1/27/2010

1/27/2000

No vesting requirements; options
exercisable as follows: 20% after one year; 40% after two years,
60% after three years; 80% after four years; and 100% after five
years

1/23/2011

1/23/2001

All options vested and became
exercisable on August 1, 2001

9/24/2011

9/24/2001

No vesting requirements; options
exercisable as follows: 20% after one year; 40% after two years;
60% after three years; 80% after four years; and 100% after five
years

1/28/2012

1/28/2002

All options vested and became
exercisable on August 1, 2002

1/27/2013

1/27/2003

No vesting requirements; options
exercisable as follows: 25% after one year; 50% after two years;
75% after three years; 100% after four years

1/26/2014

1/26/2004

No vesting requirements; options
exercisable as follows: 25% after one year; 50% after two years;
75% after three years; 100% after four years

(2)

All options grants in this table
expire 10 years from the date of the grant.

(3)

The market value of restricted
shares shown in this column is based on the closing price of our
common stock ($93.10) on December 29, 2006, the last day of
our fiscal year.

(4)

Represents MP units granted in 2006
under the MPP to executive officers and select members of senior
management designated as managing partners. See
Compensation Discussion and Analysis - Long Term
Performance Based Awards - Managing Partner Incentive
Program (MPP) in this Proxy Statement for more information
about the MPP.

(5)

The amounts shown in this column
represent the potential value of MP units granted in 2006 under
the MPP, which covered three years of the program. These amounts
are arrived at using the maximum conversion ratio under the MPP
of 2.5:1 and valuing the resulting shares at the closing price
of our common stock ($93.10) on December 29, 2006, the last
day of our fiscal year. Although the maximum ROE hurdle was
reached in 2006 and the first one-third of MP units converted
into restricted shares on January 31, 2007 at the maximum
conversion ratio, future conversion is entirely dependent on the
Companys ROE performance and there can be no assurance
that the maximum hurdle will be achieved in either 2007 or 2008.
Depending on the Companys ROE performance in those years
and the future price of its common stock, the actual value of
restricted shares received upon conversion of the remaining
two-thirds of the MP units, if any, could be different than the
estimates show in this column. Additionally, as described under
Compensation Discussion and Analysis - Long Term
Performance Based Awards - Managing Partner Incentive
Program (MPP) - MP Units, in this Proxy Statement,
executives will not receive these amounts if they are not still
employed by the Company on the conversion date.

The options were exercised using
net share settlement (options were exchanged for shares with a
fair market value equal to the net exercise price after
withholding taxes). Amounts in this column reflect the
difference between the fair market value on the date of each
exercise and the exercise price of the options exercised,
multiplied, in each case, by the number of options exercised.

In January 2002, Merrill Lynch
entered into an annuity agreement with Mr. ONeal that
provides for supplemental annuity payments (Executive Annuity).
Under the Executive Annuity, Mr. ONeal is entitled to
payments if he retires after attaining age 55 with the
approval of the Board of Directors. In the event of his death
before retirement, payments would be made to his beneficiary.
The amounts to be paid under the Executive Annuity will be based
on 1.25% of Mr. ONeals highest consecutive
five-year average cash compensation and on his length of
service. These payments will be made monthly in the form of a
single life annuity or a
10-year
certain and life annuity, or a 50% or 100% joint and survivor
life annuity and are subject to a cap that is adjusted
semi-annually for inflation. The cap is currently $1,973,055 on
the amount payable as a single life annuity or a
10-year
certain and life annuity and $1,668,570 on the amount payable as
a 50% or 100% joint and survivor life annuity.

Payments under the Executive
Annuity are reduced by: (a) amounts payable under the Met
Life Annuity described below; and (b) the combined annuity
value at retirement of account balances attributable to Company
contributions to the 401(k) Plan, and to the Merrill Lynch
Retirement Accumulation Plan, a defined contribution retirement
plan, and to allocations under the Employee Stock Ownership Plan
and 50% of the annual social security retirement benefit amount
receivable at retirement at age 65 (computed as of actual
retirement date if earlier than age 65).

The assumptions used in determining
the present value of these future payments under the Executive
Annuity Agreement as of September 30, 2006 are as follows:
(a) a discount rate of 5.50%; (b) an assumed life
expectancy based on RP-2000 mortality tables with white collar
adjustment projected to 2012; (c) payment as a 100% joint
and survivor annuity; and (d) assumed offsets for
Mr. ONeals social security benefit and
retirement and annuity payments under Merrill Lynch retirement
plans as required under the Executive Annuity Agreement. The
actuarial present value is shown assuming a retirement age of
55, the earliest retirement age permitted under the agreement
without reduction of benefits, as well as assuming a standard
retirement age of 65, consistent with the assumptions in
footnote 13 to the consolidated financial statements
included in our 2006 Annual Report. Other than the retirement
age, these assumptions are the same as those used in
footnote 13 to the consolidated financial statements except
that, as required by SEC rules, there is no assumption for
mortality or other termination of employment before the assumed
retirement date.

(2)

In 1988, we terminated our
broad-based defined benefit pension plan. In order to pay vested
pension plan benefits, we purchased a group annuity contract
from Metropolitan Life Insurance Company (Met Annuity) with a
portion of the terminated pension plan assets. Under a
supplemental agreement, the Company may recognize gains or
losses to the extent that the experience of its employee
population and investment performance of the annuity assets are
higher or lower than assumptions that are based on actuarial and
investment estimates. Mr. ONeal, Mr. Fakahany,
Mr. Edwards and Mr. McCann are eligible for payments
under the Met Annuity. The amounts shown are present values of
accrued benefits as of September 30, 2006 that would be
payable annually if the payments commenced at age 65. These
amounts were fixed at the time of the purchase of the annuities
and reflect an offset for estimated social security benefits as
required by the terms of the annuity. The amounts shown are
present values of accrued benefits as of September 30, 2006
assuming different probabilities of optional forms of payment
(10% as a single life annuity, 45% as a 50% joint and survivor
annuity and 45% as a 100% joint and survivor annuity), payment
commencement at age 65 and life expectancy based on
RP-2000
mortality tables with white collar adjustment projected to 2018.
It also assumes a discount rate of 5.50%. These assumptions are
the same as those used in footnote 13 to the consolidated
financial statements included in our 2006 Annual Report except
that, as required by SEC rules, there is no assumption for
mortality or other termination of employment before assumed
retirement.

These amounts represent the
increase in the balance of the executives accounts at
December 29, 2006 over the balance of the executives
accounts at December 30, 2005, including those amounts that
are benchmarked to private equity funds and described below and
in footnote 4 to the Summary Compensation Table. Under the
terms of our non-qualified deferred compensation plans, these
balances increase or decrease based on the performance of the
mutual funds or private equity funds that are chosen by the
individual executives as their benchmarks. Amounts benchmarked
to private equity funds may not be changed to another investment
index until the funds distribute profits. We hold private equity
investments directly to hedge our promise to pay the return.
Amounts benchmarked to publicly traded mutual funds may be
changed periodically but no more frequently than 12 times per
year. We hedge our obligations to pay the return on investments
benchmarked to mutual funds through a total return swap with an
affiliate.

(2)

Our non-qualified deferred
compensation plans are voluntary plans offered to key employees,
including the named executive officers. We do not make
contributions to the plans on behalf of any executive.
Participants in the plans are general creditors of the Company
for all amounts payable under the plans. Under pre-2007 deferred
compensation programs, account balances are debited each year by
2% of the original deferred amounts to cover costs we incurred
in offering the program. Executives are entitled to defer their
annual cash bonuses and to the extent that the executives were
named executive officers in the year that the deferral occurred,
the amounts originally deferred were reported as cash bonus in
past proxy statements.

Once income is deferred,
participants in the plan have the opportunity to index deferred
amounts to various investment vehicles or mutual funds,
including Company-sponsored private equity investment vehicles
offered from time to time that qualify as employee securities
companies under the Investment Company Act of 1940. With respect
to the private equity indexes offered in 1997, 1999 and 2001,
employees, including executive officers in 2001, were permitted
to elect to have their return (whether positive or negative)
augmented (or leveraged) on up to a
two-to-one
basis. Amounts deferred and indexed to any investment option,
including the private equity indexes offered in 1997, 1999 and
2001, generally remain deferred until the relevant distribution
date that was elected by the participant at the time of
deferral. The dollar amount of outstanding notional leverage
provided to each executive officer under deferred compensation
plans tied to private equity indexes is listed below. The
numbers in the table above are net of these notional leverage
amounts which are deducted prior to receipt by the executive of
any amounts under the plans:

Participants

Notional
Leverage

Mr. ONeal

$936,122

Mr. Kim

83,714

Mr. Fleming

134,336

Mr. McCann

827,949

(3)

Under our deferred compensation
plans, executives may elect to receive distributions on
specified dates elected by them (subject to certain
limitations). Under deferred compensation plans benchmarked to
private equity indexes offered prior to 2004, participants were
permitted to elect to receive distributions from the deferred
compensation plans at the same time as distributions are made by
the underlying private equity fund to which the performance of
the plan is indexed. The amounts in this column represent
distributions from a deferred compensation plan benchmarked to a
private equity index.

We do not have agreements with executive officers that provide
for severance unless there has been a Change in
Control of Merrill Lynch. Accordingly, if any member of
executive or senior management terminates employment for any
reason and there has not been a Change in Control,
any severance benefits are at the discretion of the MDCC.

As described in Compensation Discussion &
Analysis in this Proxy Statement, our stock grants provide
for continued vesting of previously granted awards to
retirement-eligible executives in the event of termination in
connection with retirement, provided that the executive observes
all covenants contained in the grant. These conditions include
giving the Company the required notice prior to termination,
confidentiality provisions and agreements not to compete with
Merrill Lynch or recruit or hire its employees for specified
periods. In addition, our voluntary deferred compensation plans
provide for payouts of all previously earned but deferred
amounts six months following a termination of employment other
than in connection with retirement.

With a Change in
Control

As described in Compensation Discussion and Analysis
in this Proxy Statement, we have change in control severance
agreements with seven members of executive and senior management
(including the officers named in the Summary Compensation
Table). The agreements are structured as double trigger
agreements  they provide for payments and other
benefits only if: (i) there is a Change in
Control of Merrill Lynch; and (ii) the
executives employment is terminated without
Cause or he or she resigns for Good
Reason, as these terms are defined in the severance
agreements. Our form of severance agreement is filed as
Exhibit 10.3 to our Annual Report on
Form 10-K
for the year ended December 31, 2004. In 2005, Merrill
Lynch eliminated severance agreements for 26 other members of
senior management.

A Change in Control of Merrill Lynch means:
(i) any change in control of a nature required to be
reported under the SECs proxy rules; (ii) the
acquisition by any person or entity of the beneficial ownership
of securities representing 30% or more of the combined voting
power of Merrill Lynchs then outstanding voting
securities; (iii) a change in the composition of the Board
of Directors such that, within a period of two consecutive
years, individuals who at the beginning of such two-year period
constituted the Board of Directors and any new Directors elected
or nominated by at least three-fourths of the Directors who were
either Directors at the beginning of the two-year period or were
so elected or nominated, cease for any reason to constitute at
least a majority of the Board of Directors; or (iv) the
liquidation or distribution of all or substantially all of the
assets of Merrill Lynch.

Under each severance agreement, an executive entitled to
severance compensation would receive a lump-sum payment equal to
the lesser of: (i) 2.99 times the employees average
annual W-2
compensation for the five years before termination; and
(ii) 2.99 times the employees average annual salary,
bonus and the grant value of stock-based compensation for the
five years before termination. The executive also will receive a
payment equal to the value of specified broad-based insurance
and retirement benefits (as described in footnote 2 to the
table below), as well as an amount covering income taxes on that
payment. Except as described in the previous sentence, none of
the agreements provide for the reimbursement of income taxes or
any change in control excise tax, and the executive would not
receive a payment in lieu of any foregone perquisites.

Our stock plans also provide for early vesting and payment in
cash in the event of a change in control if any participating
employee is terminated without Cause or resigns for
Good Reason. The terms of these plans are the same
for all participants.

The following table shows the amounts that would have been
payable to each of the named executive officers assuming a
termination without Cause or resignation for
Good Reason on December 29, 2006 following a
Change in Control of Merrill Lynch:

Estimated Change
in Control Payments
In the Event of Termination without Cause or
Resignation for Good Reason Following a Change in
Control

Payments for

Change in
Control

Retirement and

Acceleration
of

Severance

Amount of

Insurance

Stock-Based

Executive

Payments (1)

Perquisites

Benefits (2)

Compensation (3)

Mr. ONeal

$

29,530,284

NA

$

116,609

$

221,803,614

Mr. Edwards

18,800,486

NA

135,264

50,798,650

Mr. Kim

26,165,570

NA

92,355

80,942,671

Mr. Fleming

17,686,638

NA

91,975

70,342,362

Mr. Fakahany

17,733,000

NA

106,570

75,058,129

Mr. McCann

31,060,500

NA

112,471

88,009,928

NA=Not applicable

(1)

The amounts in this column are
calculated as if a Change in Control of Merrill Lynch occurred
on December 29, 2006, by multiplying 2.99 by the lower of
(a) the named executive officers average annual
income for the five years preceding the year of the change in
control (as reported on that executives
Form W-2
wage and tax statement for the relevant year) or (b) the
executives average annual salary, cash bonus and stock
bonus for those five years. These amounts would be payable in a
lump sum (after deduction of required withholding amounts) if
the executive is terminated without Cause or resigns
for Good Reason following a Change in Control as
described above. The severance agreement terms do not require
payments with respect to income taxes incurred as a result of
receiving such payments.

(2)

Under the terms of the severance
agreements, if an executive is terminated without
Cause or resigns for Good Reason
following a Change in Control, he or she is entitled to received
a cash lump sum equal to the sum of: (a) 24 times the
monthly cost of medical insurance pursuant to the provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (COBRA) or, if the executive is not eligible for COBRA,
24 times our monthly cost of coverage for medical insurance for
the executive and the executives family under existing
company health insurance policies; (b) two times the annual
cost to convert the Basic Merrill Lynch Life Insurance Benefit
to term life insurance; (c) six times the annual cost of
the Basic Merrill Lynch Long Term Disability Coverage;
(d) four times the annual cost for the Supplemental Merrill
Lynch Long Term Disability Coverage; (e) two times the
annual cost of the Merrill Lynch Business Travel Accident
Coverage and Basic Accidental Insurance Coverage; (f) the
maximum company matching contribution for which the executive
would have been eligible under our 401(k) Plan and our defined
contribution retirement plans as if he or she had remained
employed for the next 24 months following termination; and
(g) amounts to cover income taxes on these payments.

(3)

The amounts in this column assume
that 100% of the value of all of the executives currently
outstanding stock grants (other than MP units) are converted to
cash using the closing price of our common stock ($93.10) on
December 29, 2006, the last day of our fiscal year. For the
MP units, the amounts shown assume conversion to restricted
shares at the maximum conversion ratio of 2.5:1 for the 2006
performance year (the year the Change in Control is presumed to
have occurred under SEC rules) and at a conversion ratio of 1:1
(as required under the terms of the MP units) for the following
two years and that such restricted shares are then converted to
cash using a stock price of $93.10. Any amounts payable would be
reduced by required withholding.

Under the terms of our stock-based
plans, the actual price that would be used to determine payments
in connection with a Change in Control followed by termination
without Cause or resignation for Good
Reason would be the higher of (a) the average of the
highest and lowest price of a share of our common stock (the
Fair Market Value) on the date of such termination or
(b) the highest Fair Market Value of a share of our common
stock on any day during the
90-day
period ending on the date of the Change in Control.

The following table contains information about the compensation
of our non-management Directors. As with the tables related to
executive compensation above, the manner in which this chart and
the accompanying footnotes are presented is specified by SEC
rules. We urge you to read the footnotes carefully, as they
contain important information that clarifies the information in
the tables.

Fees Earned or
Paid in Cash (1)

Committee

Increase

Annual

Chair

in Pension

All Other

Director

Retainer

Retainer

Stock
Awards (2)

Value (3)

Compensation (4)

Total

Armando M. Codina

$

75,000

$

NA

$

185,009

$

NA

$

7,561

$

267,570

Virgis W. Colbert (5)

18,750

NA

107,985

NA

1,557

128,292

Jill K. Conway

75,000

40,000

185,009

-

967

300,976

Alberto Cribiore

75,000

25,000

185,009

NA

6,586

291,595

John D. Finnegan

75,000

15,000

185,009

NA

6,794

281,803

Judith Mayhew Jonas (5)

18,750

NA

107,985

NA

25

126,760

Heinz-Joachim
Neubürger (6)

24,938

NA

-

NA

33

24,971

David K. Newbigging

75,000

25,000

185,009

-

24,610

309,619

Aulana L. Peters

75,000

NA

185,009

19,014

11,537

290,560

Joseph W. Prueher

75,000

15,000

185,009

NA

16,498

291,507

Ann N. Reese

75,000

NA

185,009

NA

1,179

261,188

Charles O. Rossotti

75,000

NA

185,009

NA

6,551

266,560

NA = Not Applicable

(1)

The annual cash retainer for each
director is $75,000, payable in equal monthly installments. In
addition, the Chair of each of the Audit Committee
(Mr. Newbigging) and the Management Development and
Compensation Committee (Mr. Cribiore) receives an
additional annual amount of $25,000 and the Chair of each of the
Finance Committee (Mr. Finnegan), the Nominating and
Corporate Governance Committee (Mrs. Conway) and the Public
Policy and Responsibility Committee (Adm. Prueher) is paid an
additional annual amount of $15,000. The Lead Independent
Director (Mrs. Conway) also receives an additional annual
amount of $25,000. These additional amounts also are paid in
cash in equal monthly installments. Directors have the option of
deferring all or a portion of their cash compensation under the
Fee Deferral Plan for Non-Employee Directors. Under this plan
Directors may index deferred amounts to the performance of
Merrill Lynch common stock or publicly traded mutual funds.

(2)

Directors are granted deferred
stock units with a dollar value of $185,000 annually. Amounts in
this column show 100% of the grant date fair value of stock
awards for each Director, which is recognized in the year of
grant, in accordance with FAS 123R. See footnote 14 to
our consolidated financial statements included in our 2006
Annual Report for an explanation of the assumptions used in the
FAS 123R valuation. Grants of deferred stock units are made
each year on the date of the Annual Meeting. If a Director joins
the Board during the year, he or she receives a pro-rated grant.
The number of deferred stock units awarded is determined by
dividing the dollar amount of the award by the average of the
high and low price of a share of our common stock on the date of
grant. Deferred stock units represent our obligation to deliver
one share of common stock for each unit at the end of a
five-year holding period, or, if earlier, when the
Directors service on the Board ends. Payment of the
deferred stock units may be deferred further at the option of
the Director, subject to certain limitations. Deferred stock
units have no vesting provisions and are not subject to
forfeiture. Deferred stock units do not have voting rights but
receive common stock dividend equivalents (in the form of
additional deferred stock units).

As of December 29, 2006, the
last day of our fiscal year, the non-management Directors held
the following deferred stock units and stock options:

Year-end Value
of

Year-end Value
of

Director

Deferred Stock
Units

Deferred Stock
Units (a)

Stock
Options

Stock
Options (b)

Armando M. Codina

5,256

$

489,323

-

$

-

Virgis W. Colbert

1,384

128,832

-

-

Jill K. Conway

13,502

1,257,020

17,672

775,184

Alberto Cribiore

8,852

824,156

8,333

358,883

John D. Finnegan

7,187

669,096

3,554

131,498

Judith Mayhew Jonas

1,384

128,832

-

-

Heinz-Joachim Neubürger

-

-

6,696

206,457

David K. Newbigging

10,966

1,020,971

17,672

775,184

Aulana L. Peters

12,159

1,131,958

-

-

Joseph W. Prueher

10,967

1,020,981

16,732

796,389

Ann N. Reese

6,826

635,508

2,512

106,986

Charles O. Rossotti

6,826

635,508

2,512

106,986

(a)

Deferred stock units are valued
using the closing price ($93.10) of our common stock on
December 29, 2006, the last day of our 2006 fiscal year.

(b)

Under an earlier plan, Directors
also received stock options, but under the new director stock
plan approved by shareholders in 2005, 100% of the annual
director stock awards are granted as deferred stock units.
Previously-granted stock options are valued using the difference
between the exercise price of the stock option and the closing
price ($93.10) of our common stock on December 29, 2006.

(3)

Represents increase in the
actuarially determined present value of retirement benefits
provided to three non-management Directors who remain eligible
for a director retirement program that was discontinued in 2001.
Mrs. Conway and Mr. Newbigging had no increase. When
their service ends (for any reason other than cause), each of
these Directors is entitled to receive annual retirement
payments of $55,000 for life, or a lump-sum payment of $55,000
multiplied by an actuarial factor based on the Directors
age at retirement. If a participating Director were to die while
serving on the Board, his or her estate would receive a lump-sum
death benefit computed by multiplying $55,000 by an actuarial
factor based on age at death. No further retirement benefits
have been extended under this arrangement since February 2001
when the arrangement was discontinued. The present value of this
benefit decreased in 2006 by $27,179 and $26,994 for
Mrs. Conway and Mr. Newbigging, respectively.

(4)

All other compensation consists of
the amounts described below and itemized in the following table:



Insurance
Coverage. We
provide term life insurance benefits for non-management
Directors who joined the Board after February 2001. The table
includes the incremental cost to the Company of providing such
insurance coverage. In the event that a Director were to die
while serving on the Board, his or her beneficiary would receive
a payment equal to the annual cash retainer amount ($75,000).
This benefit is not provided to Directors eligible for the
discontinued retirement benefit. Directors who served on the
Board prior to February 2001 are also eligible to elect medical
insurance benefits under a discontinued program. The coverage
provided is generally comparable to that offered to our
employees except that we provide these benefits on a
non-contributory basis and with differences in deductible,
co-insurance and lifetime benefits. Mr. Newbigging receives
medical insurance benefits under this program, which are
included in the Insurance Coverage column below.



Company
Events. We
occasionally invite the Directors and their spouses to certain
events, including an annual
multi-day
offsite strategy session held in conjunction with one of our
Board meetings, which also are attended by our executives and
their spouses. We believe these events provide valuable
opportunities to meet and establish relationships with senior
executives, enhance leadership development and succession
planning strategies and advance our business objectives. Amounts
in the column entitled Participation in ML Events
include the incremental cost to the Company of items, including
travel costs for spouses, meals and activities that may be
considered to provide a personal benefit in connection with
these events. Directors traveling from outside the United States
can be expected to show higher incremental costs and receive
higher tax reimbursement payments than
U.S.-based
Directors.

Tax
Reimbursement. The
Tax Reimbursement column shows amounts paid to
Directors to reimburse them for additional taxes on imputed
income associated with attendance at Company events.

Insurance

Participation in

Tax

Director

Coverage

ML
Events

Reimbursement

Total

Armando M. Codina

$

99

$

4,833

$

2,629

$

7,561

Virgis W. Colbert

25

929

603

1,557

Jill K. Conway

-

595

372

967

Alberto Cribiore

99

3,774

2,713

6,586

John D. Finnegan

99

3,961

2,734

6,794

Judith Mayhew Jonas

25

-

-

25

Heinz-Joachim Neubürger

33

-

-

33

David K. Newbigging

487

16,886

7,237

24,610

Aulana L. Peters

-

5,570

5,967

11,537

Joseph J. Prueher

99

10,785

5,614

16,498

Ann N. Reese

99

654

426

1,179

Charles O. Rossotti

99

3,829

2,623

6,551

Because the FAS 123R value of deferred stock units is based
on the fair market value of Merrill Lynchs common stock,
which includes an expectation of a future stream of dividends,
amounts paid as dividend equivalents on outstanding deferred
stock units are not included in the All Other
Compensation column.

(5)

Joined the Merrill Lynch Board of
Directors on October 1, 2006.

(6)

Retired from the Merrill Lynch
Board of Directors on May 1, 2006.

The Directors are reimbursed for expenses, including travel
expenses, incurred in connection with their service as
Directors. Merrill Lynch occasionally provides transportation to
and from Board meetings on aircraft owned or leased by the
Company. Directors also are covered by the broad-based Merrill
Lynch travel insurance policy that covers our employees when
traveling on Merrill Lynch business.

We pay for a portion of the services of the secretary to David
K. Newbigging, the Audit Committee Chairman, in connection with
support provided for the administrative requirements of the
Audit Committee in accordance with the Audit Committees
Charter. These payments, totaling $26,155 in 2006, cover a
portion of the secretarys compensation and
employment-related expenses. From time to time we make office
space in our existing facilities available for periodic use by
the Directors in carrying out their responsibilities. The cost
to the Company from use of such space is minimal.

Our Directors are eligible to participate in our broad-based
matching gifts program pursuant to which we match gifts to
certain charitable organizations by participants, up to an
annual limit of $1,500. In 2006, we made matching gifts of
$1,500 to charitable organizations designated by
Mr. Rossotti.

Other than as described in this section, no compensation was
paid to any Director for service on the Board or any Board
Committee.

State Street may be deemed to be the beneficial owner of more
than 5% of the outstanding shares of our common stock as a
result of its role as trustee of certain of our employee
benefits plans and other unaffiliated accounts and investment
funds. In addition, AXA and certain related entities may be
deemed to be the beneficial owner of more than 5% of the
outstanding shares of our common stock. For further information,
see Beneficial Ownership of Our Common Stock 
Owners of More than 5% of Our Common Stock in this Proxy
Statement. We and certain of our subsidiaries have engaged in
transactions in the ordinary course of business with each of
State Street and certain of its affiliates and AXA and certain
related entities during 2006. These transactions were on
substantially the same terms as comparable transactions with
unrelated third parties.

As permitted by the Sarbanes-Oxley Act of 2002, certain of our
Directors and executive officers and their family members have,
from time to time, borrowed money from our banking subsidiaries
in the form of mortgage loans, revolving lines of credit and
other extensions of credit. These transactions are entered into
in the ordinary course of business on substantially the same
terms, including interest rates and collateral provisions, as
those prevailing at the time for comparable transactions with
our other similarly situated customers and do not involve more
than the normal risk of collectibility or present other
unfavorable features.

Certain of our Directors and executive officers and their
immediate family members maintain brokerage accounts with
certain of our subsidiaries. These accounts are maintained in
the ordinary course of business on substantially the same terms
as those offered to similarly situated customers.

For certain types of products and services offered by our
subsidiaries, our Directors and officers may receive discounts
that are available to our employees generally.

From time to time, we may perform investment banking, financial
advisory, trading, brokerage, lending and other services in the
ordinary course of our business for certain corporations with
which some of our Directors are affiliated. Those services are
provided on substantially the same terms as those prevailing at
the time for comparable transactions with our other similarly
situated customers. We also may, from time to time, purchase
goods and services from such corporations in the ordinary course
of our business on customary terms.

From time to time, in connection with investigations by
regulatory and governmental bodies, we provide the names of
certain counsel with expertise in the area to our employees. An
employee requiring these services generally selects counsel from
among the attorneys whose names are provided by and whose fees
are paid by the Company. Robert J. Hausen, an experienced
litigator, is the spouse of Rosemary Berkery, our Executive Vice
President and General Counsel. Since 1999, Mr. Hausen has,
from time to time, provided such counsel. In 2006, fees payable
to Mr. Hausen for such services were approximately $88,000.

If you wish to submit a shareholder proposal to be included in
the proxy materials for our 2008 Annual Meeting, you must submit
the proposal in writing to our Corporate Secretary no later than
November 16, 2007.

If you wish to submit a proposal or a matter for consideration
at our 2008 Annual Meeting, but you do not meet the deadline for
inclusion in the proxy materials, our By-Laws require that the
proposal be submitted by the holder of record of the shares and
received by the Corporate Secretary at least 50 days before
the date of the 2008 Annual Meeting. As a general matter, we
hold our Annual Meeting during the third or fourth week of
April. Your proposal also must comply with certain information
requirements set forth in our By-Laws. The By-Laws are filed as
an exhibit to our Current Report on
Form 8-K
filed with the SEC on December 12, 2006 and may be found on

the Corporate Governance Website. You also may obtain a copy of
our By-Laws from our Corporate Secretary. These requirements
apply to any matter that a shareholder wishes to raise at the
Annual Meeting other than pursuant to the procedures set forth
in
Rule 14a-8
of the U.S. Securities Exchange Act of 1934. The deadline
for receiving proposals for consideration at the 2007 Annual
Meeting was March 8, 2007.

Pursuant to our Certificate of Incorporation and By-Laws, any
shareholder wishing to propose a Director nominee for election
to the Board at the Annual Meeting must ensure that written
notice from the holder of record of the shares is received by
our Corporate Secretary at least 50 days but no more than
75 days before such Annual Meeting. Any shareholder who
holds shares through a bank, broker or other holder of record
must instruct the record holder to submit the written notice in
a timely fashion. For further information, see Corporate
Governance - Director Nomination Process in this
Proxy Statement.

The business scheduled to come before the 2007 Annual Meeting is
as set forth in the Notice of Meeting and as described in this
Proxy Statement. Other business may only be brought before the
meeting in compliance with the provisions of our Certificate of
Incorporation and By-Laws. If any other matters should properly
arise at the Annual Meeting, your proxy will be voted on such
matters at the discretion of the proxy holders designated on the
accompanying form of proxy.

Section 16(a) of the U.S. Securities Exchange Act of
1934 requires our Directors and executive officers and persons
who own more than 10% of a registered class of our equity
securities to file reports of ownership of, and transactions in,
our equity securities with the SEC. Such Directors, executive
officers and 10% shareholders also are required to furnish us
with copies of all Section 16(a) reports they file.

Based on a review of the copies of such reports and the written
representations of such reporting persons, we believe that all
Section 16(a) filing requirements applicable to our
Directors, executive officers and 10% shareholders were complied
with during 2006.

To the extent that this Proxy Statement is incorporated by
reference into any other filing we make under the
U.S. Securities Act of 1933 or the U.S. Securities
Exchange Act of 1934, the sections of this Proxy Statement
entitled Audit Committee Report and Management
Development and Compensation Committee Report (to the
extent permitted by the applicable rules of the SEC) will not be
deemed incorporated, unless specifically provided otherwise in
such filing.

The Board of Directors (the Board) of Merrill
Lynch & Co., Inc. has adopted a formal set of standards
with respect to the determination of director independence. To
be considered independent for purposes of these
standards, a director must be affirmatively determined by the
Board not to have a material relationship with Merrill
Lynch & Co., Inc. and its subsidiaries (Merrill
Lynch) other than as a director. In each case, the Board
shall broadly consider all relevant facts and circumstances and
shall apply the following standards (the Director
Independence Standards).

A.

Employment/Compensation:

1.

The director shall not have been an employee and no family
member1
shall have been an executive
officer2
of Merrill Lynch during the last three years.

2.

The director shall not have received more than $100,000 per
year in direct compensation from Merrill Lynch during any
twelve-month period within the last three years. Direct
compensation shall not include director and committee
fees, reimbursement of expenses incurred in connection with
service as a director and pension or other forms of deferred
compensation for prior service (provided that such compensation
is not contingent upon continued service).

3.

No family member of the director shall have
received more than $100,000 per year in direct compensation
from Merrill Lynch during any twelve month period within the
last three years.

4.

(a)

The director shall not be a current partner or
employee of Merrill Lynchs independent auditing firm (the
Auditing Firm).

(b)

No family member of the director shall be a
current partner of the Auditing Firm or a current employee of
the Auditing Firm who participates in the Auditing Firms
audit, assurance or tax compliance (but not tax planning)
practice.

(c)

Neither the director nor any family member shall
have been during the last three years a partner or employee of
the auditing firm and personally worked on Merrill
Lynchs audit within that time.

5.

Neither the director nor any family member shall
be or have been, during the last three years, employed as an
executive officer of a company while any of
Merrill Lynchs present executive officers
serves or served on such companys compensation
committee.

The Board has determined that employment relationships,
compensation and directorships that are not inconsistent with
the foregoing standards are categorically immaterial
relationships and, therefore, do not impair independence. In
applying the standard in Paragraph A. 3., the Board need
not consider

1

A family member means a
directors spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than a domestic employee of
such director) who shares such directors home.

2

An executive officer means the Chief
Executive Officer, President, Chief Financial Officer, Principal
Accounting Officer, (or if there is no such accounting officer,
the Controller), or any officer or person in charge of a
principal business unit, division or function, or who performs a
policy-making function.

compensation received by a family member of the
director for service as a non-executive employee of Merrill
Lynch.

B.

Business
Relationships:

It is expected that all business relationships between Merrill
Lynch and a company (including subsidiaries and affiliates) with
respect to which the director or any family member
has a primary business
relationship3,
will be conducted on an arms-length basis. The Board has
determined that business relationships with primary
business relationships that are not inconsistent with
the standards set forth below are categorically immaterial
relationships and, therefore, do not impair independence:

1.

Payments by Merrill Lynch to a primary business
relationship of the director or the directors
family member for property or services that do not
in any single fiscal year during the last three fiscal years
exceed the greater of $1 million or 2% of the consolidated
gross revenues of such primary business
relationship.

2.

Payments to Merrill Lynch by a primary business
relationship of the director or the directors
family member that do not in any single fiscal
year during the last fiscal three years exceed the greater of
$1 million or 2% of the consolidated gross revenues of such
primary business relationship.

3.

Financial services transactions, including but not limited to
underwriting, banking, lending, trading in securities or
derivatives and co-investment transactions, between Merrill
Lynch and a primary business relationship of the
director or the directors family member,
provided that (a) Merrill Lynchs gross
fee revenues (including interest payments or other fees paid in
connection with loan transactions) from such transactions
(together with other payments for property or services in the
applicable fiscal year, if any) do not exceed the threshold set
forth in Paragraph B.2 above, (b) such transactions
are in the ordinary course of business of Merrill Lynch and are
made on terms substantially consistent with those prevailing at
the time for corresponding services to similarly situated,
unrelated third parties, and (c) in the case of lending
transactions, the termination of the lending relationship in the
normal course of business would not reasonably be expected to
have a material adverse effect on such primary business
relationship.

In addition, the Board of Directors has determined that business
relationships between Merrill Lynch and a company that is not a
primary business relationship, including business
relationships with a company for which a director or
family member serves as a non-management director
(including non-executive chair), are categorically immaterial
relationships and, therefore, do not impair director
independence.

C.

Relationships as
a Client:

1.

It is expected that any services (such as, brokerage services,
lending services, insurance and other financial services)
provided to a director or any immediate family
member4
by Merrill Lynch will be provided in the ordinary course of
Merrill Lynchs business and on substantially the same
terms as those prevailing at the time for comparable services
provided to unrelated third parties or to Merrill Lynch
employees on a broad basis. The Board of Directors has
determined that services that are not inconsistent with this
standard are categorically immaterial relationships that do not
impair independence. The Board of Directors has also determined
that services provided to directors in connection with the
fulfillment of their duties and responsibilities as directors
are categorically immaterial and, therefore, do not impair
director independence.

3

For purposes of these standards, a primary business
relationship exists with an entity if the
director is currently the controlling shareholder or an employee
of the entity, or if any family member of the director is
currently the controlling shareholder or an executive
officer of the entity.

4

An immediate family member includes a
directors spouse, and other family members (including
children) who share the directors home or who are
financially dependent on the director.

The Board of Directors has determined that the following
philanthropic relationships are categorically immaterial
relationships and, therefore, do not impair independence:

1.

Contributions by Merrill Lynch to educational or charitable
institutions for which the director serves solely as a
non-executive trustee or director (or in a similar capacity).

2.

Discretionary contributions by Merrill Lynch (excluding
contributions made under Merrill Lynchs matching
gifts program) to any educational or charitable
institution for which the director serves as an executive
officer5
that do not exceed in any single fiscal year during the
preceding three fiscal years the greater of
(i) $1 million or (ii) 2% of the recipients
most recent publicly available consolidated gross revenues.

5

For purposes of this standard, an executive officer
of an educational or charitable institution means a CEO,
President, Executive Director, Executive Vice President, or any
other officer who performs a policy making function.
Non-executive Trustees or Directors (or persons performing
similar functions) are not considered to be executive officers.

E. Stanley ONeal, Rosemary T. Berkery and Ahmass L.
Fakahany are hereby appointed individually as proxies (with full
power to act without the others and with full power of
substitution) to attend and to vote for the undersigned on the
matters listed on the reverse side hereof at the Annual Meeting
of Shareholders to be held on April 27, 2007, or at any
adjournment or postponement of that meeting and, in their
discretion, upon other matters that arise at the meeting. This
proxy revokes all proxies previously given for the same shares
of stock.

The shares represented by this
proxy will be voted in accordance with instructions given on the
back of this card. If this proxy is signed and returned without
specific instructions as to any item or all items, it will be
voted FOR the election of 3 directors as named herein, FOR
the ratification of the appointment of the independent
registered public accounting firm and AGAINST each of the
shareholder proposals.

(Signature of Shareholder)

Date

(Signature of Shareholder)

Date

Please vote on the reverse of this card. Sign,
date and return this card promptly using the enclosed envelope.
Sign exactly as name appears above. Each joint tenant should
sign. When signing as attorney, trustee, etc., give full title.